On August 14, 1984, Commodore International purchased Amiga Corporation for $27 million, with the expectation of bringing Amiga’s multitasking computer with high-color graphics and sound to market within a year. It took a little longer than that, and it created one of the more interesting might-have-beens of 1980s computing.
The Amiga demo
Amiga demonstrated a prototype at the January 1984 Consumer Electronics Show (CES) in Chicago, attempting to attract investors, with a 68000-based development system called the Sage IV driving large prototype board stacks substituting for the chipset that did not yet exist in silicon. With no operating system ready, the system demos, including the famous Boing ball demo, ran on bare metal.
Byte magazine reported in April 1984 that Amiga Corporation “is developing a 68000-based home computer with a custom graphics processor. With 128K bytes of RAM and a floppy-disk drive, the computer will reportedly sell for less than $1000 late this year.”
Amiga for sale by summer
Amiga was back at the summer CES from June 5-8, 1984. By then, the company was for sale. Amiga talked to numerous companies, including Sony, HP, Philips, Apple, and Silicon Graphics. Steve Jobs of Apple examined the prototype himself. Silicon Graphics was more impressed than Steve Jobs was, but they only wanted the chipset, not the computer. Amiga also talked to Jack Tramiel, the exiled founder of Commodore and future owner of Atari. Tramiel was interested but every time Amiga made a counteroffer, Tramiel lowered his offer.
Amiga was desperate. Jay Miner, co-founder, lead engineer and architect, took out a second mortgage on his home to keep the company from going bankrupt.
Amiga quickly got caught up in a tangled web.
Amiga’s one-sided deal with Atari
Atari had use for the Amiga technology, but they wanted it cheap. Atari itself was in dire financial straits in the summer of 1984. They offered a harsh 30-day bridge loan for $500,000. If Amiga didn’t repay it within 30 days, Atari would take ownership. Amiga took the deal, meaning they had to find a buyer by the first week of July.
That set in motion a rapid fire sequence of events.
The rapid fire sequence of events behind Commodore’s Amiga purchase
On June 14, 1984, at around 2:30 AM, Amiga secretly met with Commodore and worked out a deal. Commodore would pay $27.1 million for the company and pay off the loan to Atari. The only reason we know about this meeting is the existence of handwritten notes by Commodore treasurer Don Greenbaum that he supplied to Commodore historian Dave McMurtrie.
Two weeks later, on June 29, Amiga CEO David Morse appeared at the Atari office with a check to pay off the $500,000 loan, plus interest. The money came from Commodore.
On July 1, 1984, Jack Tramiel bought Atari. Tramiel had been poaching Commodore engineers since April. Sometime later in July, Commodore sued to try to prevent those engineers from working on a new computer for Atari.
In early August, new Atari VP Leonard Tramiel discovered the agreement between Atari and Amiga, including the cashed check for $500,000. On August 13, Atari counter-sued Commodore and Amiga for breach of contract.
A day later, on August 14, Commodore purchased Amiga. According to Chapter 10 of The Home Computer Wars, by Michael Tomczyk, Commodore’s stock price rose from below $20 to above $30 after the purchase.
Why Commodore wanted Amiga
Commodore was selling more computers than anyone in 1984. The VIC-20 had been the bestselling computer of 1982, while the C-64 was the bestselling computer of 1983 and 1984, on its way to becoming the bestselling computer model of all time. But VIC-20 sales dropped worryingly after 1982, and Commodore was afraid the C-64 would follow a similar path.
But while the C-64 was waiting in the wings before the VIC-20 started to fade, in June 1984 all Commodore had to succeed the C-64 was the Plus/4 disaster. The key engineers behind the C-64 had left. Al Charpentier and Bob Yannes, the designers of the VIC-II and SID chips in the C-64 left in 1983 to found Ensoniq. One of their chips found its way into the Apple IIgs computer. Other longtime Commodore engineers followed Jack Tramiel out the door.
Amiga neatly solved Commodore’s problems. Here was a proven engineering team with a new next-generation design that would be ready to hit the market sometime the following year.
The Amiga 1000 proved the concept but sales were disappointing. It was with 1987’s Amiga 500 and 2000 that Amiga came into its own. But even the Amiga 500 didn’t repeat the C-64’s success.
Commodore couldn’t keep this team together either. The original Amiga team, minus Jay Miner, went on to design the Atari Lynx and the 3DO game consoles.
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.