Last Updated on January 28, 2026 by Dave Farquhar
On July 2, 1984, Atari got a new owner. After a disastrous 1983, its owner, Warner Communications, wanted out, just a year and a half after Atari had $2 billion in sales. It went from being called the greatest acquisition in history in the New York Times to a toxic asset in about 18 months. Warner found a buyer in Jack Tramiel, the exiled founder of Commodore.
Atari: From greatest acquisition in history to toxic asset
On December 19, 1982, the New York Times quoted Donald Valentine, a California venture capitalist, as calling Atari the greatest acquisition in history. Here’s the quote in context.
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.
To give the quote historical context, Kassar led Atari from less than $200 in revenue in 1978 to nearly $2 billion in revenue in 1982. But even as that article reached newsstands, he was falling from grace.
In the first three quarters of 1983, Atari lost $535 million. Warner’s stock price was taking a beating and they wanted out. In true 80s style, they sold Atari in pieces, although that wasn’t really what they set out to do. Separating Atari was about finding buyers quickly, not maximizing returns.
Why Jack Tramiel wanted Atari
Meanwhile, Jack Tramiel had quit as Commodore’s CEO on January 13, 1984. Not ready to retire at age 56, Tramiel was looking for a computer company to buy. There was a rumor connecting Tramiel to Mindset, makers of an 80186-based PC-like machine with advanced graphics. Tramiel also notoriously tried to buy Amiga, but his offer kept getting worse and worse, quickly souring them. This was completely separate from the deal Amiga negotiated with Atari.
In the end, Tramiel paid $240 million for Atari, in borrowed money. It was in the form of 10- and 12-year notes. Tramiel took over as the new CEO and installed his sons, Sam, Garry, and Leonard, as lieutenants. (Garry’s first name is frequently misspelled, but Leonard Tramiel confirmed the spelling of his brother’s name several years ago over social media.) They cut Atari down to 300 employees, and recruited a few key figures from Commodore, including Shiraz Shivji–one of the designers of the Commodore 64–and industrial designer Ira Velinsky.
Tramiel had little interest in video games. He took the consoles since that was part of the same division as the home computers, but didn’t want the arcade division. That’s part of the reason why when the Atari arcade division entered the home video game market, they used the name Tengen.
Jack Tramiel’s comeback: Power without the price
Tramiel’s new team rushed a new computer to market, a 68000-based computer called the Atari ST. The machine went from concept to functioning demonstration unit in less than 6 months, beating its rival, the Amiga, to market. Commodore and Atari traded lawsuits, basically with Commodore accusing Atari of stealing the ST from Commodore and Atari accusing Commodore of stealing the Amiga from Atari. The companies settled with terms that were never disclosed, but were generally believed to be favorable to Atari. The ST reached the market first and sold 50,000 units quickly, but ultimately proved more popular in Europe than in North America. Their motto of “Power Without the Price” worked in 1985, but lost some shine as PCs gained power and decreased in price later in the decade.
The new Atari expected the ST to do the heavy lifting but they assembled a lineup around it. Under Tramiel, Atari’s 8-bit computers got a revamp, and while their PC line weren’t big hits, their handheld Atari Portfolio helped usher in a new category of PC. Atari also got back into game consoles. The canceled 7800 console reached the market, a slimmed-down 2600 console re-entered the market, and the curious XE game system also hit the market. Atari also acquired the rights to the Lynx handheld console, and its swan song was the Jaguar console of the early 1990s.
Tramiel-era Atari had its best year in 1986, when it turned a $25 million profit. It never bled like 1983 Atari, but never reached the soaring heights of 1982 Atari either. Atari made some questionable decisions along the way like buying a chain of electronics stores, but ultimately, the problem was Atari couldn’t win a race to the bottom in price against the growing PC ecosystem.
Atari after the Tramiels
In 1996, Atari merged with JTS, a short-lived maker of hard drives. Atari had cash reserves but no product to sell, while JTS had a product but lacked funding. JTS wanted to make very inexpensive hard drives for PCs, undercutting companies like Seagate and Western Digital. You could almost call JTS the Jack Tramiel of hard drives. But the “JT” stood for Jugi Tandon, not Jack Tramiel.
Ultimately the JTS hard drives weren’t commercially successful and Atari’s name changed hands a few times before re-emerging in the 2020s as a retro gaming company.
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.