Odd stories started to emanate from the Sunnyvale giant about unsold VCS cartridges.  A pattern of bad decisions, including massive expenditure on other, mostly computer related projects, started to plague Atari.  But it was the money spent on film licenses that most publicly hurt the company.  For example, Atari management decided to spend nearly $25 Million for the rights to E.T. - A massive movie, but a disastrous VCS title.   The software was pushed through development by senior management, just like Pac-Man had been - but consumers were more educated, and titles like E.T.  and Raiders of the Lost Ark were making no impressions with the gaming public. 

As legend unkindly has it, and after much pressure from Atari retailers and users, 450,000 E.T. cartridges were loaded on a convoy of "twenty-toners" which trundled their way out to the New Mexico Desert - with the aid of earth moving equipment, they were dumped in a land-fill close to the White Sands nuclear testing grounds... 

1983 had many other surprises in store for the company.  After the disastrous launch of the 5200 VCS (which wasn't compatible with the 2600) and the 1200XL computer which was ditched soon after it's launch, Atari tried to pull one last punch from it's depleted energy reserves. 

The 5200 was an effort to compete with the CBS ColecoVision, and it did it well technically.   The problem with the 5200 was it's analogue joysticks and the slightly higher price tag - the 5200 was sold boldly in the retail stores, with it's big bright packaging and associated gaming devices (such as a trackball and old-type joystick add-on's), but it wasn't going to be enough to put Atari back on track.  Atari pulled production of the 5200 in February 1984.

1984 - The 7800 VCS was the product which the 5200 should have been.  It was less expensive to manufacture and was made backward compatible to the 2600 VCS, which pleased the 20 Million 2600 owners...  But it would be the last video games system to be launched under the Warner owned Atari.