Warner sells off Atari for $240 m

THE surprise sale of Atari to a new company headed by ex-Commodore president Jack Tramiel has now taken place (see PCW, July 5). Tramiel’s first move after taking over has been to substantially cut the workforce. Several hundred of the 1,000 employees at the company’s Sunnyvale headquarters will be laid off this week and Atari’s El Paso manufacturing base has been closed with the loss of 300 jobs.

Tramiel who founded ComModore, and turned it from a typewriter importer to a computer company, has set up Tramiel Technology Ltd (TTL). It bought the home computer and video game divisions of Atari, leaving Warner Communications with the coin-operated games section and Ataritel, a new telephone making project. However, it is thought Warner intends to sell these as well.

TTL paid $240m (£178m) in total for the Atari computer and video game divisions, and also aquired warrants giving it the option of buying one million Warner common shares.

The sale of Atari to Tramiel was unexpected. It was known that Warner had been looking for a buyer for the last year. but the Dutch-based company Phillips were thought to be main contenders.

The future of Atari projects such as its up-market $1,000 home computer and the video games designed by Lucasfilms is now unclear.

Atari’s rise and fall in the computer market was meteoric. Warner bought the company for $27m and saw Atari’s sales rising to $2bn in 1982.

But in 1983, sales almost halved and Atari suffered a of $538.6m.

Last September James Morgan was bought in from Pepsi by Warner as chairman. He set a target of profitability for Atari by the fourth quarter of 1984, and scrapped many Atari projects, which did not look to be immediately profitable. He also cut staff by 1000 in order to reduce overheads.

Morgan, however, has left the company since the TTL sale went through.

Tramiel’s strategy at Atari will be to concentrate on the low cost computer market — thus bringing it directly into competition with Commodore.