"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
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
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
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
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
3) - Minimal product advertising
4) - Senior management attrition
5) - Product positioning, support and
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
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
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
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
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
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