Wayne%OZ.AI.MIT.EDU@XX.LCS.MIT.EDU (Wayne McGuire) (09/26/86)
[The following was downloaded from Newsnet and is retransmitted without the
permission of Newsnet or Stewart Alsop. -- WHM]
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Copyright
STEWART ALSOP'S P.C. LETTER
September 24, 1986
THE NEW ATARI CORP.: MAKING NEW MONEY AND NEW MACHINES
I love to see Atari proving everybody else wrong, not the
least because I was crazy enough in my very first issue to
say that I thought Atari would survive and prosper under
Jack Tramiel's redoubtable leadership. Now the company has
decided to offer its stock to the public in a bid to get out
from under the clouds left by its unusual "purchase" of the
assets (if you could even call them assets) of the Old Atari
Corp. from Warner Communications. If it's successful in
selling 4.5 million shares for about $12 a pop, the company
will have enough money to pay off Warner, some of its
creditors, and still have enough cash to add a few million
to the $29 million or so it already has in the bank.
At a minimum, what Jack Tramiel and his sons have managed to
do with the carcass of Atari is nothing short of amazing.
When they acquired Atari's inventory and name, the company
had a video-game machine and two computers that were costing
about twice as much to build as they were selling for (if I
read the prospectus correctly). The Tramiels have since
reduced costs on the old Atari products so the company now
pretty much breaks even on them. In the interim, the company
redesigned the 2600 game system and 400 and 800XL computers
(now called the 65XE and 130XE) so that they could sell them
profitably. And, in what amounts to a remarkably short time
(about nine months), Atari has designed and delivered a
completely new computer that, despite its low pricing, makes
the company a ton of money on each unit. The net result is
that Atari went from selling about $7 million worth of old,
unprofitable products in the first half of 1985 to selling
$89 million worth of new, highly profitable products in the
first half of 1986.
Since shipping the 520ST in July 1985 and the 1040ST in
about March of this year, Atari has managed to sell more
than 150,000 ST computers worldwide. If I was to guess, I
would say that about 60,000 of those computers have been
sold in the U.S., about 25,000 in West Germany, and the
other 75,000 in the rest of the world. That's not too
shabby, particularly compared to Commodore's record of
selling less than 100,000 Amigas in the last 12 months. But
the widespread distribution of STs around the world makes
the ST a tough market for software publishers: it's hard to
even identify good distribution, much less promote products
efficiently. But it's just enough to take the ST seriously
as a viable format (particularly given Atari's always vague
product plans, detailed below). Remember that everybody was
writing off Tramiel's Commodore in 1982 and 1983 when it was
selling most of its computers into Europe. It's reasonable
to assume that, just as he did with Commodore, Tramiel will
use his overseas sales to build up Atari so it's strong
enough to take on U.S. mass merchants in earnest.
Atari hasn't been sitting still in the new-product area. The
company introduced two and four megabyte versions of the ST
at the recent PCW show in London: the 2080ST and 4160ST.
From what I saw in Atari's labs yesterday, those computers
haven't really been finished. But the company also plans a
repackaging of the ST that it will introduce at Comdex,
which is when you'll probably see the higher-memory versions
of the ST. The new package will be a two-inch-high box with
a built-in, 3.5-inch floppy drive, a built-in power supply
(finally), a bracket for an internal, half-height hard disk,
detached keyboard, and single, in-line memory modules (like
those used in the Macintosh). It's unclear to me whether the
company will have a different version of the ST that also
includes its new blitter chip (which produces very fast,
very high resolution graphics) or whether it will make that
chip standard. Atari is also working on a Unix box (packaged
in the same case described above) that would turn the ST's
68000 processor essentially into a dedicated graphics
processor and unload the logic onto its own 68020 or 68030
processor. The proposed pricing for that Unix box would be
$1,000, which along with the $1,500 or so for the
two-megabyte 2080ST and whatever a reasonable monochrome
display might cost, would turn Atari into a pretty
competitive workstation manufacturer.
(Don't take any of this as gospel. Although I've seen
engineering drawings and prototype boards for most of it,
with a Tramiel-run company you can't always tell whether a
computer in the lab will ever reach the marketplace. By the
way, we won't have Sig Hartmann to kick around at the next
SPA meeting: Sig is now working on calling on large
companies to pitch them on buying STs and future products.
From one tough job to another.)