Atari’s earnings miss in December 1982

Last Updated on January 28, 2026 by Dave Farquhar

Atari’s biggest year was 1982, when it earned $320 million on $2 billion in sales. But it ended on a very sour note. On December 8, 1982, its parent company, Warner Bros, announced it expected a dramatic slump in fourth quarter per-share earnings largely because of disappointing sales of Atari’s video game cartridges. The news of Atari’s earning miss sent Warner’s stock price reeling, losing $16.75 per share the day after the announcement.

Making matters worse, 16 days later, Atari had to announce two cases of insider trading. Its CEO, Ray Kassar, sold 5,000 shares of Warner stock just before the announcement. Atari Executive Vice President Dennis Groth sold 6,376 shares a week before, on December 1. The shares had been trading at $51 per share just prior to the announcement. And the losses didn’t end. By December 23, 1982, Warner Bros. stock was trading at $29.50 per share, losing 42 percent of its value.

This was a stunning reversal, and media accounts at the time painted a bleak picture.

Contemporary media accounts of Atari’s earnings miss

On December 19, 1982, the New York Times reported Atari contributed half of Warner’s $2.9 billion in revenues and two thirds of its $471 million in operating profits in the first nine months of 1982. It cited order cancellations due to strong competition from Coleco’s Coleco Vision console and third-party publishers like Activision and Imagic while Atari trotted out a weak lineup of game cartridge titles in its second half, depending on games licensed from the movies E.T. and Raiders of the Lost Ark. Neither of these movie-licensed titles sold in the numbers Atari expected.

The problem began in October 1981. Atari met with its distributors and asked them to commit to orders for virtually all of 1982. At that time, Atari had about 80 percent of the hardware and software market, with Mattel its main competitor. In previous years, Atari had been unable to keep up with demand, so distributors ordered more than they really thought they would need.

The New York Times quoted Emanual Gerard, co-chief operating officer of Warner, as saying the company was ”blind-sided” because it had never experienced this scale of competition and massive order cancellations before. He said the company is changing its procedures to prevent that from happening again.

Gerard told analysts that the company was “lulled” by its previous success. The Times cited, way back in Dec 19, 1982, that “Atari’s 2600 version of Pac-Man, though widely faulted for the quality of its graphic display, still sold extremely well. It came out just before the competition hit and made Atari think it could sell virtually anything. It couldn’t.”

No help from Atari’s arcades or home computers

Atari had other lines of business, but they didn’t help. The Times also reported Atari’s arcade game business also failed to turn a profit that quarter, and its home computer business had never been profitable, and was facing an uphill battle for market share against Texas Instruments and Commodore.

All of the factors we now cite as contributing to the North American video game crash of 1983 were present in December 1982. But not everyone saw the collapse yet. This stunning jewel was buried in the middle of the Dec 19, 1982 New York Times article:

Warner purchased Atari for a mere $28 million in 1976, mainly at the urging of [Emanual] Gerard. “That has to be the greatest acquisition in history,” said Donald Valentine, a California venture capitalist who was an initial backer of Atari. [Emanual] Gerard ousted [Atari founder Nolan] Bushnell and his associates and installed [then-CEO Raymond] Kassar.

As we now know, things didn’t get better for Warner or Atari in 1983. In its first quarter, Warner announced a loss of $18.9 million. That compared to a profit of $77.9 million the year before. On Dec 31, 1983, the Washington Post reported Atari had lost $535 million in its first three quarters of 1983. The Post article also included an Iraqi Information Minister-style denial by new CEO James J. Morgan that Atari was for sale.

The Post also mentioned Atari’s desperation move, Atarisoft, a venture to publish software for rival consoles and home computers. Near the end of its article, it stated that if Morgan could bring Atari back to its former heights, it would be the greatest corporate turnaround since Lee Iacocca turned around Chrysler.

We know now that didn’t happen.

Reversing the greatest acquisition in history

As for those claims that Atari wasn’t for sale, if Atari wasn’t for sale on Dec. 31, 1983, it was soon after.

In July 1984, Warner unceremoniously reversed the “greatest acquisition in history,” selling it for $240 million to exiled Commodore founder Jack Tramiel. Admittedly, this was 8.5 times the price it had paid 8 years before. But the amount suggested Warner believed Atari’s profits for each of the next 10 years would be more along the lines of $24 million than its $320 million peak in 1982. So it was no longer priced like a nominee for the greatest acquisition in history.

And even that estimate may have been optimistic. Atari earned $25 million in profits in 1986, but that was its best year under Tramiel. Tramiel-era Atari survived until mid-1996 when it merged with JTS, a maker of inexpensive computer hard drives.

Dave Farquhar

David Farquhar is a computer security professional, entrepreneur, and author. He has written professionally about computers since 1991, so he was writing about retro computers when they were still new. He has been working in IT professionally since 1994 and has specialized in vulnerability management since 2013. He holds Security+ and CISSP certifications. Today he blogs five times a week, mostly about retro computers and retro gaming covering the time period from 1975 to 2000.