Classic Computer Magazine Archive COMPUTE! ISSUE 50 / JULY 1984 / PAGE 44

Atari's New Lease On Life

Fred D'Ignazio, Associate Editor
Selby Bateman, Features Editor

Out of the ashes of a disastrous 1983, a slimmer and more serious Atari, Inc., is fashioning a comeback under the guiding hand of new chairman and CEO James Morgan. In this, the first of a two-part look at Atari and its new products, Morgan talks candidly to COMPUTE! about his company's mistakes, its strengths, its hopes.

Atari chairman James Morgan
James Morgan, chairman and chief executive officer of Atari, Inc.

When an especially strong earthquake recently shook the California city of Sunnyvale, most of the residents shrugged, smiled nervously, and tried not to think about the next one.

But among the hundreds of people who work for Atari in more than two dozen nondescript buildings there, the quake appeared to be hardly noticed. When you've already had the world turned upside down and are feverishly working to restore your corporate footing, a little more trembling scarcely seems worth worrying about.

In retrospect, the earth shaking that Atari took from the end of 1982, through 1983, and into the early part of 1984, seems to have had the same sort of explosive force that first powered the company into be coming a billion-dollar organization. Almost overnight, Atari went from being king of the videogame and home computer market to being every analyst's example of the boom-and-bust potential inherent in the computer revolution.

World-Class Problems

The litany of problems was in deed world-class: over half a billion dollars in losses for the first three-quarters of 1983, premature announcements of several products that never appeared, the unsuccessful launch of the 1200XL computer, layoffs of hundreds of Atari employees, and a management team wracked with dissension, low morale, and a lack of corporate focus.

Enter James Morgan, a former Phillip Morris marketing executive, who replaced Ray Kassar in September 1983. His mandate from parent company Warner Communications was as simple to state as it was difficult to carry out: Turn Atari around.

"Before I came, this company thought it was a toy company, IBM, and everything in between," says Morgan. "And it was devoting people and resources to all of that."

Energy, Hope, And Resolve

Morgan has not gone about his cleanup at Atari quietly. Instead, he has become one of the most outspoken critics of the company's past policies. He often sounds more like an irate consumer than a computer company president.

In his effort to reshape Atari, Morgan laid off an additional 250 employees last winter, including Chris Crawford, Atari's highly regarded research and-development director. Also, Atari's chief scientist, Alan Kay, left the company in the spring to join Apple Computer as an Apple Fellow.

Despite these changes--and in some cases because of them--Morgan appears to have brought new energy, new hope, and a new resolve to Atari's efforts. With an enthusiasm that has been missing for over a year, Atari employees and executives this spring were eagerly preparing for June's Consumer Electronics Show in Chicago and for the 12 months following--commonly acknowledged as the period during which Atari must show the world and Warner Communications that it is back on the right track.

"The Public Still Loves Us"

Morgan is excited--not only about Atari's future plans--but about the company's current strengths, which he believes have been largely overlooked.

"The financial analysts and the computer press have been disenchanted with Atari for several months, but the public still loves us. This gives us a franchise from the consumer to develop the type of microprocessor products that the consumer will want," he says.

"Before we could announce any products though, we had to get a sense of our own self-identity. Who are we? What are our strengths?"

All has not been bleak for Atari. The 600XL and 800XL computers have sold well. In fact, Morgan told analysts earlier this year that Atari could have sold about 40 percent more computers during the Christmas rush if they had been available to ship. And despite dire predictions about the death of the videogame machine, Atari seems confident that this market is stronger than some analysts have estimated.

AtariLab science kit
The AtariLab computer science kit, with its temperature module, brings science into the real world for computer users and is one indication of Atari's commitment to quality educational software.

AtariSoft And Atari Learning Systems

Atari's market share began climbing this past spring. And the company's software division, AtariSoft, and its educational division, Atari Learning Systems, both appear to be doing well.

Linda Gordon, who directs the Atari Learning Systems Group, has a strong team, including Dorothy K. Deringer, formerly program officer with the National Science Foundation. In the burgeoning educational software field, Atari expects this division of the company to offer some of the most innovative and high-quality products for schools and home learning that will be available in the industry.

Products like the recently released AtariLab, a computerized science kit, and a series of other products similar in scope and quality (being introduced at CES) are creating excitement and momentum within the entire Atari organization.

Morgan is quick to point out what he feels are a few of Atari's underlying strengths. "First, the combination of color graphics and sound in Atari computers is better than in our competitors' computers. Second, more people are familiar with Atari than with any other computer company. Remember, 16 million Americans have an Atari computer--a 2600 videocomputer system--in their home," he says.

"Third, when people think of Atari, they think of entertainment. That is a tremendous advantage, but not just so we can sell more videogames. Computers can make learning more entertaining. They can even make work more entertaining—as well as more productive."

The Computer Of 1990

But Morgan is frank about what he feels Atari must do in the future to reestablish itself as a creative and credible force in the microcomputer field. A committee Morgan chairs at Atari, called "The Computer of 1990," meets frequently to brainstorm about future directions. Division heads and product managers reportedly have more communication with one another than in the past. And products or strategies that once went unquestioned, have all undergone Morgan's scrutiny.

For example, the popular Atari Program Exchange (APX), a division of the company which purchased, produced, and marketed consumer-written programs for Atari computers, has been drastically reshaped.

"Atari has redeployed some of its resources and programs so that they are more consistent with the goals of the company:, says Morgan. "In the case of APX, Atari has discontinued the mail-order portion of the program. Atari lost money in this portion of the business.

"Moreover, Atari had to come to grips with the fact that Atari is not in the mail-order business. However, APX will continue to review products sent to Atari by outside programmers," he says. "If the programs are topnotch, they will be added to the main Atari catalogue. Otherwise, they will not be sold by Atari in any fashion."

The Fate Of The 1450XLD?

Morgan also took a hard look at Atari's plans for a high-end computer. The 1400XL and the 1450XLD, announced at the June 1983 Consumer Electronics Show (CES), were never released. The 1400 was unceremoniously dropped, and the 1450, although exhibited at the January CES, was not yet on the market.

"Atari will sell a high-end computer in 1984," Morgan now says, "but the specific product features of that high-end machine still are under review. We showed the 1450XLD at the Consumer Electronics Show in January of 1984 to demonstrate our intent to mark et a high-end machine this year."

In fact, by the time you read this, Atari may well be marketing such a computer. And this points to one of the major changes Morgan has instituted at Atari: "We want Atari to be seen as the consumer's friend," he says. "That means we don't announce any products unless we are willing to back them 100 percent."

Enhancing Lives Through Interactive Electronics

Morgan also makes it clear that Atari has no intention of abandoning the computer market.

"That's the real tragedy of Atari. Despite a record of several excellent computers, we are still known as a videogame company" he says. "But we're going to change that. Over the next 18 months, we will be introducing a host of new products that will create an awareness and acceptance of Atari as being a superior computer manufacturer."

While Atari's product line will be more focused than in the past, the company's new strengths will have a broader base, Morgan suggests. "Our goal isn't to just produce computers. It is to produce products that enhance consumers' lives through interactive electronics."

"Invisible" Computers

"To think this way, we have to think beyond user friendliness and beyond desktop computers. We have to think of products that are invisible.

"For example, a truly friendly product should not separate you from the task at hand. It should be like a refrigerator--you just reach inside the door and get what you need. After all," he says, "the product, any product, is not a hero. It is just a medium. It is the carrier of what is important."

Morgan clearly expects June's CES show in Chicago to be a major first step in the company's introduction of new products aimed at carrying Atari back to critical and financial success. But he has not limited Atari to the introduction of products at trade shows.

Tuning In To The Consumer

In early May, Atari announced new Lucasfilm games--Ballblazer and Rescue on Fractalus--which Atari has developed in association with the special effects wizards at the well known motion picture company. And by the time you read this, Atari is scheduled to have premiered a new high-end game machine, the 7800 Pro System. Both of these new products were scheduled to be shown at CES in June as well.

"Our major priority at Atari is to tune in to the consumer. Ultimately, the home computer is not an entity unto itself. It is not a question of what a computer can do. It is a question of what a consumer does with it," Morgan says.

"In my opinion, we still have not given consumers a compelling reason to buy a computer. And we haven't spent enough time molding our products to consumers' desires."

Atari's "Smart" Telephone

"For example, most people like to communicate with other people," he says. "That is a real need and a real desire. And computers can help people communicate. But it's not easy. You have to type all sorts of special codes and commands, just to get started. Instead, it should be just as easy as using a phone. You should be able to press a couple of buttons and communicate."

Morgan says that AtariTel, the company's telecommunications division, will introduce "smart telephones" in the second half of 1984. "These telephones will be microprocessor-based. We currently are deciding how we will market the product," he adds.

While redirecting Atari's efforts, Morgan has also studied the microcomputer industry as well. And one of the major problems still troubling the industry, he emphasizes, is that home computer technology is ahead of the average consumer without matching the consumer's real needs. The challenge, therefore, is for computer manufacturers to translate this new technology, while at the same time giving prospective buyers genuine reasons to purchase a computer.

Alan Alda Is The Bridge

Assisting in Atari's efforts to explain its computers is actor Alan Alda, who represents what Morgan calls a "bridge" to adults by selling the application of Atari technology, and the ease of use.

"He [Alda] always picks one activity, like word processing, or education, and shows you how you can do it on an Atari. Alan doesn't want to make adults buy computers because they feel guilty. He wants them to buy a computer because they're excited about doing something they have seen him do," says Morgan.

"Also, he never sells RAM, ROM, or CPUs. The CPU is the least important element in the computer. It is like the engine of a car. Most people buy a car without opening the hood," he says. "There is a common understanding among car owners that the engine will work, and it will get them where they're going. The CPU is like the engine. You've got to have it, but you don't sell computers because of it alone."

Morgan's Open Letter

Morgan's impact at Atari has not only been felt directly by his employees. He has also gone out of his way to be accessible to industry analysts, the press, and--most importantly--the thousands of loyal Atari owners who are both a present and future market and a formidable, knowledgeable circle of critics.

A personal and candid letter from Morgan to Atari owners popped up on the message section of CompuServe earlier this year, for example. In the note, Morgan thanked them for their support and criticism, explained his view of Atari's past problems, and requested their continued interest in Atari's future.

This kind of attention to personal detail, and the simultaneous redirection of Atari's efforts, have done much to restore the morale among Atari employees and have helped give the company valuable time in which to develop, and properly introduce, new products.

Frank Questions And Open Communication

Morgan seems to understand that his role must be multifaceted. "I act as a catalyst to the Atari management team, which has the real job of running this company," he says. "I try to set the tone for the management committee and I help point the group in certain directions.

"As someone who joined this industry as an outsider, I have been able to take a fresh look at the entire consumer electronics field in general and this company, in particular. I'm not afraid to ask frank questions, and also question why we do things the way we do. I encourage all Atari employees to examine their own work in the same way.

"I believe strongly that one of my biggest contributions to Atari will be the implementation of a corporate culture here that inspires teamwork and open communications," Morgan says. "I want to encourage people to take calculated risks and not be afraid to fail. That's part of being an excellent company. If we become an excellent company, then sales and profits will follow."

(Next month, COMPUTE! will take an in-depth look at Atari's new product line from the Summer Consumer Electronics Show.)