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The Tramiels - What did they ever do for Atari?

 "Business is war - I don't believe in compromising. I believe in winning." Jack Tramiel

Many people are critical of the Tramiel family.  They blame the family for the downfall of the company and don't have many positive things to say about them in general.  Why have they been treated this way by so many?  Is there any truth to these suggestions of incompetence or greed?  I want to share with you a basic insight into the Tramiel business ethic, some of the main areas of concern that many believe didn't help the company and in closing, end with my personal feelings.

To understand the Tramiel business philosophy is the simple part.  Jack Tramiel in particular had a war like attitude to doing business, and he was very open about this.  He had a black and white approach to his business model; sell more to the customer at a price he/she is prepared to pay.  Listening to interviews and reading articles about Jack Tramiel you quickly build up a picture of a man who has steadfastly stuck to his business principles for his entire career.  He is not a man that would easily change his plans once he had decided upon his chosen path, and more importantly, this shows a belief in himself that many other mortals would find difficult to muster.

It is this, near stubborn quality, that has enabled Jack Tramiel to be a successful business man, and some of this can also be attributed to the, how should we say, errors of judgement he has perhaps been responsible for, either directly or indirectly, at Atari Corp.

Jack Tramiel was responsible for one of the most prestigious computer companies of the late 70's and 80's, and that company was Commodore Business Machines.  It is through his reign at CBM, we can see some of the traits he brought to bare on Atari which he took over in 1984.  For example, After the acquisition of MOS Technologies in 1976, he couldn't believe the amount of R&D expenditure, which was supporting over 200 separate projects.  He quickly set about slashing these budgets and cancelling almost all non-essential projects, streamlining his new subsidiary to concentrate on chip production for his calculator range and his new venture, building a micro-computer.

Jack was responsible for taking the chance to diversify CBM into the world of micro-computers.  It was a gamble that soon paid off, with the launch of the PET (Personal Electronic Transactor) at the end of 1976.  By 1984, CBM's sales were close to a Billion Dollars.  Jack Tramiel would soon leave the company he had worked so hard to build, after a boardroom battle, which to this day is still somewhat of a mystery.

Jack must have been in a solemn mood after this crossing of swords within the inner sanctum of CBM, after all, this was a company of his own design, and now it had been taken from him.  Still, this is where we see the true grit of the man.  He planned a return, and decided to bide his time while he looked for a vehicle for his next project.  Jack founded a company called TTL (Tramiel Technology Ltd) which would be a holding company for his next acquisition.

Now, Atari at this time (1984) was the thorn in the side of Warner Communications Inc.  It was bleeding its parent company dry, and Warner needed to dump the company quickly.  1984 was a self-made meltdown of the once buoyant video games market which had started in 1972 with the inception of the worlds first commercially successful video arcade game, PONG.  The video games crash was partly Atari's fault, and retailers and customers alike, had been overwhelmed by too many systems and too many games, many of which were expensive and poorly made.  The market had been flooded, and product was sitting on the shelves with no homes to go to.

Jack Tramiel realised that although video games were going through a rough patch, the market for micro-computers was still in its infancy, and growing far quicker than most other industry sectors.  Jack knew he wanted to compete with his former company, but he needed not only a product to ship to the market, but a recognisable brand name to launch it, otherwise he would need to spend additional money and time building brand awareness.

Its almost of Hollywood proportions, but Jack Tramiel would buy Atari, CBM's former competitor, and begin building a rival to challenge the very company he founded.  Not only would Jack initiate a purchase agreement with Warner Communications, that today, would seem farcical, but he would launch a new computer to the market within Six months of his takeover.  The basis of Jacks purchase of Atari, was a promissory note and a number of purchase obligations.  Remember, Warner were desperate to offload Atari, and this played into the hands of any smart investor willing to take a long term risk.  Warner even provided additional loans to the new Atari Corporation amounting to $25 Million.

Looking more closely at this purchase "deal", it took nearly 2 years for an evaluation of the assets to be determined, so a true value could be negotiated between the two parties (although Warner would receive  accrued interest on the final purchase price at 17% during this period).  It is also interesting to note that the official price released in June 1984 for the purchase was $240 Million, the final figure was much closer to about $95 Million, which was mostly paid for through the sale of Atari stock to Warner, and a once off payment of $36 Million for certain assets and loans in late 1986.

Whatever your personal feelings of the Tramiels, the purchase of Atari was a culmination of some smart work, and it also gave Warner a quick and clean way to get the debt ridden company off its books.  Warner even paid some of the outstanding and substantial  Atari debts itself, this included huge inventories passed onto the new Atari Corporation, estimated to be in the region of over $250 Million, which is why to this day, you can still buy new boxed Atari software with the WCI logo on it...

Jack Tramiel took over only the domestic side of Atari Inc, leaving certain properties such as the Arcade Division, and the new Advanced Telephones Systems Division with Warner.  The Tramiels' began straight away by clearing the decks - Atari was a monster of a company under Warner Communications, it employed over 10,000 people, had over 100 physical properties worldwide, including 80 offices and facilities in Sunnyvale, California alone.  In order to make the new Atari anything other than a viable proposition, serious cuts in personnel and assets had to be made.

By the end of 1985, ~1,600 employees were now working for Atari, and it was shipping a new computer system called the Atari 520ST.  In order for Jack Tramiel to physically ship a new computer system to end users within 12 months of his takeover, many painful and not so painful decisions had to be made.  This is not incompetence, nor is this greed.  It clearly showed how to turn a loss-making behemoth into a streamlined and  cleverly operated business, and showed the market just how serious the new Atari was, which paved the way for Atari to re-launch itself to the market and raise additional money for expansion.

After selling nearly all of its Warner manufactured stock, and re-launching a new line of 8-bit computers (or at least cost-effective versions of the older Warner-made computers), Atari had raised enough money to survive until the end of 1985.  Through the stock option plan in 1986, Atari would have a healthier balance sheet, and was also obliged to carry out its plans to its new shareholders.  These plans included new ST computers, new 8-Bit systems and additional products based on new technologies, which Atari promised to provide to the market at the lowest possible prices.

In the Tramiels favour, depending on your point of view, Atari was saved in 1984.  It wasn't the ideal solution, many good people lost their jobs, and many exciting projects within Atari had to be shelved, but this was the price that had to be paid (bluntly speaking from a purely business perspective).  Of course, Warner could have done a lot of things differently and you could assume that if the right choices had been taken earlier, perhaps Atari could have survived?

Credit where credit is due.  Atari was still in business, and within 2 years made a profit of $44 Million.  In the face of severe market competition, the Tramiels had to sell enormous amounts of Warner's inventory, as much as 95% of Atari Corps early sales are attributed to this.  By the end of 1985, Atari had a new range of products, the market was excited and end users were very happy with their new machines.  So, where did all the animosity come from, what happened to taint the Tramiels with the ultimate downfall of Atari?

What were the main areas of concern?

1) - Lack of defined development strategy for the ST line of computers

2) - Late products and vapourware announcements

3) - Minimal product advertising

4) - Senior management attrition

5) - Product positioning, support and distribution

6) - Performance in the video games market

The Atari ST was an advanced, feature rich personal computer when it was launched.  It had been received with critical acclaim, and initial sales were strong, enabling Atari Corp to prove itself to the market place and end users.  It changed the perception of the Atari brand, and critically, was launched ahead of the more expensive Commodore Amiga, and at a better price/performance point in comparison to the Apple Macintosh and IBM compatibles.

Atari had surprised all the pundits, and it was the best possible start for the new Atari Corp.  But this market leading position did not last long.  The ST architecture didn't change until late 1989, 4 years after its launch, and although OS and cosmetic changes took place, the product did not evolve quickly enough.  This would not have been such an issue if the new ST (launched as the STE - E for Enhanced) had been a significant advancement of the existing platform, but it was not the case.

We should point out however, that the computer market at this time wasn't as we now it today.  Today's PC runs from a Microsoft (or to a lesser extent, Linux) platform, and manufacturers design PC's through industrial standards and third-party "add-on" product lines.  Those of you who have been fortunate enough to experience the personal computer market of the 80's and early 90's will be split into two camps; those who enjoyed having a broader range of platforms to choose from, and in turn, could experience different system/software capabilities from a choice of suppliers and the other camp who preferred the standardisation in both hardware and software platforms.  Today, its basically a choice between a PC "box" or an Apple "box".  Its also true to say that some people are just plain critical no matter what the choice!

You could also be of the opinion that Intel, Microsoft and the OEM's have stunted competition, technological advancement and more importantly, consumer choice.  After all, the PC isn't radically different to the ST, Amiga or Apple platforms of old, and is overly complicated in its design, especially to new users.  It was much easier to use an ST for the first time, and was less intimidating in its approach, compared to today's PC.

During the launch of any new product, new platforms need time to get a foothold, and the ST and its competitors systems also needed time to mature in their respective markets.  Unfortunately, the ST could "possibly" have been one of today's "standard" platforms if it wasn't for the lack of development and marketing.  The STE should have been a lot more, instead it was a computer system that cosmetically looked the same, and technically, lacked any enhancements that played so well to the market during its maiden launch in 1985.

Of course, a lot of this is purely speculation.  But the facts are that the ST should have been continually advanced through a strategic development roadmap.  We do know that Atari R&D was working on 32-Bit computers as early as 1986, and that development was taking pace, but unfortunately these developments were too little, too late.  The ST was aging fast, and the PC market was advancing in leaps and bounds.  Atari had limited budgets compared to the much larger PC multinationals, and it was carrying a proprietary platform on its own.  Atari tried launching PC's as well and Commodore became a leading PC supplier in the late 80's, in fact, only Apple stuck to its guns and continued stubbornly along its proprietary path (although, Apple survived!).

Atari did have success with the ST, that cannot be denied. Europe in particular became the cash cow, and Germany became Atari's single biggest market.  But the PC manufacturers marched on, as prices continued to fall and big business' wanted to standardise their IT systems.  The Multi-tasking PC was the computer of choice for most companies by the end of the 80's, and this was also helped along by Intel and Microsoft.  As early as 1990, Atari must have seen the dark clouds forming over its comparatively small market share, and its ability to take on the "big boys" wasn't even financially viable, never mind technologically.

If Atari had carried its fight from the launch of the ST, and concentrated on a more aggressive long-term strategy, perhaps it could have carved an Apple-like niche in the market.  What pains end-users of the ST the most, is knowing that the platform was viable from day one, and it had a strong presence in many areas, specifically as a home computer, as a cost effective DTP platform and especially in the music industry where it held an enviable position as the music computer of choice.  We can only ask one question of Atari, "did they actually know this too"?

It didn't help that Atari shouted about new products months, sometimes years before their launch.  The TT030 for example, which was launched in Germany in 1989, could have been the platform to take the DTP market by storm, it could have been the Unix platform of choice.  But again, it was delayed even after its "official" launch, and although it had limited success in Europe, Atari let down its domestic market once more by failing to pass its computer products in a timely fashion through FCC certification.  The TT030 is just one product that "could have been" for Atari, and it wasn't the last.

Another problem, and probably the most talked about, was Atari's failure to market its products in such a way as to actually promote interest in them.  That's not to say Atari didn't market its products, it was the way it was done.  Jack Tramiel in particular wasn't a friend of the marketing department, he was of the old school of business, and felt that his products sold themselves because of the price and performance they offered to the consumer.  He wasn't alone with this philosophy, Ken Olsen of Digital Equipment (another high-tech brand now part of history) didn't recognise advertising as a forum to promote his products or to increase sales, in fact, Digital's marketing departments were hidden away within the company until the mid-eighties before pressure was brought to bare by other board members.

The ST was purchased by consumers who either had an older Atari computer, or through the influence of the independent computer magazines and journals.  Outside of this arena, many potential consumers just didn't know of the machines existence, and were unaware of its power and price.  When Atari did advertise, it was usually sporadic and through the wrong media.  It didn't help that the economic climate was poor compared to today, but even taking consumer spending into account, Atari could have spent more dollars to ensure a potentially higher return.

Support and distribution was a constant struggle for Atari.  It is fair to say that these are common challenges for any company, but it was Atari's domestic market that would be most challenged in this respect.  Atari tried in vain to "buy" market presence through the controversial purchase in 1987 of the "Federated Stores" chain, only to sell it off again in 1990.  While most Atari computer shipments from their Taiwan facility were directed to the hungry shores of Europe, Atari distributors in the U.S. could only hope that Atari HQ in Sunnyvale would soon wake-up and take their own domestic market seriously, otherwise the already dwindling dealer network would be reduced to a handful of specialist stores.

Atari was a family run company.  The Tramiel's held more than 45% of the stock, and this would become a serious issue for senior management when it came to  decision making and department autonomy.  The attrition rate of senior management at Atari was legendary, it would have been easier for Jack Tramiel to install a revolving door in each of his senior managers offices.  It was that bad.  There is a saying; "You live by the sword, you die by the sword", (you've probably heard this if you've ever worked in sales!), but that was a physical fact of life if you tried to impose, or dictate a strategy or plan that the Tramiels were opposed to.

This constant shake-up within Atari also had a negative effect outside of the company.  Morale is critical to the well-being of a company, and when those all too familiar e-mails contain the words "has left to pursue a new career and we all wish he/she well for the future" begin to become a regular occurrence, it isn't helpful to the staff, the company image, and ultimately the confidence of the consumer and the wider market place.  There were many famous names that had walked through the corridors of power in Sunnyvale, some of these figures had ultimately been seen as the saviours of  Atari's future, and they were extremely well received by the user groups and developers still hoping the tide would change for the company.  But even those high profile names such as Elie Kenan and Tedd Hoff failed to change the mindsets of the Tramiel family.

Perhaps the most heart-breaking aspect to the Tramiel rap-sheet is the wasted opportunity that was their possession of the Atari brand itself.  In essence, the famous Fuji icon was best known for gaming, and this was one market that the Tramiels could never understand.  Jack Tramiel had made his position clear in 1984, that he wasn't interested in gaming products, and that Atari was a computer company.  Atari had a perfectly good product in 1984 with the Warner/GCC designed 7800 Pro System, but this was left on the shelf until 1986, after Nintendo of Japan began to make inroads with its new Nintendo Entertainment System.

It is true that Atari Corp. had enough on its plate trying to become a successful computer company, but it seems that it continued to respond to Nintendo and Sega with knee-jerk reactions.  Atari wasted a golden opportunity with the 7800, and repeated this with the Lynx and to some extent, the Jaguar.  The same "old" problems that plagued the computer division seemed to affect any assault on the gaming world.  The handheld Lynx was a coup for Atari, but one has to ask why it was delayed for some 2 years, apparently it was ready to go in 1987!  Nintendo launched an inferior product technically in the Game Boy, and it soon dominated the gaming world, yet the superior Lynx slowly faded into obscurity helped along by its parent company... Atari.

The 64-Bit Atari Jaguar, the last hope for the company, had a great start.  It can not be denied that the system was powerful, and the press and public alike, couldn't wait to get their hands on one.  The machine was late to market, and the games were taking time to develop, but during 1994, it still seemed possible that the Jaguar would do it for Atari.  There was even talk that the now defunct computer division might be resurrected with a system based on Jaguar technology, the share price was active again, and Atari was back in the lime-light, somewhere it had not been for quite a while.

By the end of 1995, as projects such as the VR Helmet and the online gaming modem were cancelled, new games only trickled out of the Atari warehouse and stores began putting bargain price tags on the Jaguar console, it was clear to see something was wrong.  Sony was wooing the market with Playstation, and Atari was looking for an exit.  It had tried to win back the helicon days that defined the launch and success of the 2600, but sadly it didn't work out.

So, there you have it.  A brief summary of the Tramiel era.  For every little thing they may have done wrong, they also did some good things too.  I'm still thankful when I boot up my Jaguar to play Tempest 2000, and my friends still can't believe that the Lynx is so good, especially knowing it was launched in 1989!  My ST still works, and has never caused me any problems, and its nice to turn it on now and again, just for the nostalgia value.

In closing, I can only assume those that "got on" with Jack Tramiel in particular, liked his personal style, he was straight talking and didn't waste time making decisions.  Sam Tramiel was a lot more relaxed, compared to his father, and those who have met and worked with him provide testimony to this.  I wouldn't say that any of the Tramiel family were selfish in the running of Atari, they did deliver good products with affordable price tags, and although its easy now to criticise what are historical facts, you must still admire what they successfully achieved and ultimately what they "tried" to achieve.  Commodore left the stage long before Atari, as did many other companies that shared the cut-throat world of consumer electronics both as partners and competitors to each other. 

So, what did the Tramiels ever do for Atari?  They gave us another 12 years of Atari branded products, and we can all be grateful for that.

Copyright 2002 KM/AEX - Do not reprint without permission.

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