LATELY THERE'S BEEN SOME CONFUSION OVER THE "ORGANIZATIONAL
ADJUSTMENTS" THAT WE'VE BEEN EXPERIENCING HERE AT ATARI.
LET'S PUT IT ALL INTO PERSPECTIVE ...

AT THE END OF 1983, ATARI ANNOUNCED LOSSES OF OVER 500 MILLION
DOLLARS.  THERE WAS SOME TALK THAT THESE LOSSES WERE ACTUALLY
CARRIED ON THE BOOKS OVER SEVERAL PRECEDING QUARTERS, AND THAT
MR. MORGAN WAS SIMPLY GIVEN A FRESH START.  THE FACT REMAINS
THAT ATARI HAS BEEN, AND STILL IS, LOSING AN ENORMOUS AMOUNT OF
MONEY, ENOUGH TO MAKE ANY COCAINE IMPORTER'S HEAD SPIN.

THE HOME COMPUTER MARKET HAS FALLEN FLAT ON IT'S FACE.
PEOPLE FINALLY REALIZED THAT THEY DIDN'T NEED A HOME COMPUTER
FOR ANYTHING EXCEPT PLAYING GAMES.  MOST OF THE PERCIEVED NEED
FOR A HOME COMPUTER COULD ONLY BE ATTRIBUTED TO MARKETING HYPE.

THE GAME CARTRIDGE MARKET HASN'T BEEN DOING MUCH BETTER.
WE ALL HEARD ABOUT THE BIG HOLE IN THE GROUND WHERE THEY
BURIED THOUSANDS UPON THOUSANDS OF "DEFECTIVE" CARTRIDGES.
WHAT ACTUALLY HAPPENED WAS THAT OUR TOP MANAGEMENT "EXPERTS"
OVERESTIMATED THE CARTRIDGE MARKET BY SEVERAL MILLION UNITS.
MEANWHILE, SYNERTEK AND STEVIE-BOY ARE LAUGHING ALL THE WAY
TO THE BANK $$$.

AND THEN THERE'S THE COIN-OP MARKET.  LET'S STOP KIDDING
OURSELVES.  SOME OF US WORK 10, MAYBE 12 HOURS A DAY ON
GAMES WHERE THE BEST WE CAN REALISTICALLY HOPE FOR IS
A TOTAL PRODUCTION OF 5000 UNITS.  THAT WORKS OUT TO SOME
VERY MEAGER BONUS-SPLITS, FRIENDS.

FEW SIGNIFICANT CHANGES HAVE BEEN MADE TO RECTIFY THE
SITUATION FACING ATARI:  WARNER REPLACED MR. KASSAR
WITH A CIGARETTE EXECUTIVE.

UNFORTUNATELY FOR MR. MORGAN, HIGH-TECH ELECTRONICS IS A
HIGHLY DYNAMIC AND VOLATILE BUSINESS TO BE IN:
THE MORTALITY RATE FOR HIGH-TECH START-UPS IS VERY HIGH
COMPARED TO OTHER INDUSTRIES.  MR. MORGAN'S EXPERIENCE
LIES IN THE VERY STABLE AND WELL-ENTRENCHED TOBBACO INDUSTRY:
IT'S A REPLACEMENT MARKET WITH TEENAGERS REPLACING THE
LUNG-CANCERED OLDSTERS.


     CIGGIES AND GAMES
       ARE SORT OF THE SAME...
     LITTLE SQUARE BOXES
       THAT TEENIES GET HOOKED ON.

WHAT THIS ALL BOILS DOWN TO FROM AN "ENGINEERING"
POINT-OF-VIEW IS THAT IT'S PROBABLY TIME TO GET ON
THE VAX AND UPDATE THE RESUME.  AND CONSIDERING THAT
THE REST OF THE INDUSTRY IS NOW IN THE 16-BIT AND 32-BIT
WORLD, IT MIGHT BE A GOOD IDEA TO ENROLL IN A FEW GRADUATE
COURSES.  ( HOWARD SAMS JUST DOESN'T CUT IT ANYMORE ).

FOR THOSE OF US WHO ARE RECIEVING BONUS-SLPITS,
IT MAKES SENSE TO GET LAYED OFF RATHER THAN QUIT, BECAUSE
IF YOU GET LAYED OFF, YOU ARE LEGALLY ENTITLED TO ALL
BONUS MONEY THAT YOU WOULD HAVE GOTTEN HAD YOUR EMPLOYMENT
CONTINUED AT ATARI.

... HOWEVER, THINGS MAY GET SO BAD HERE IN THE NEAR FUTURE
THAT IT WILL BE BETTER JUST TO QUIT ...

	REMEMBER WHAT AESOP SAID ABOUT SOUR GRAPES


	ANYONE WHO LISTENS TO THAT GIBBERISH IS A FOOL!

				CAROLE (I'M STAYING) JUNIOR

I agree with the sour grapes analogy.
Pete's attitude is like pollution: it stinks and it can spread.
     Jack Ritter

Franusic has some valid points.  However, what Atari does not need right
now are quitters.  I've seen Atari make many mistakes and I am sure that
I will see many more, but, Atari is a large corporation and it is good
to remember that Large corportations may stumble, but they seldom fall.

There will be plenty of time to decide to quit if Atari really shows signs
of colapsing.  It is true that things are not what they used to be.  Games
are not as popular as before.  The markets are glutted, both Consumer and
Coin-op.  That glutting cannot go on forever, however.  There is a product
lifetime which, once past, even the best products (for their time) cannot
be sold.  When the video game companies (Atari included) can no longer dump
their excess inventories of old games (hopefully this will not take more that

a year,) then new games can begin to go back on the market in a controlled
fassion.  When that time comes, we must be prepared with some VERY GOOD,
VERY ORIGINAL products.

Entertainment is not a fad, but repetition does not make for good entertainment.
The game industry must stop cloning the old games.  We must come up with
original concepts.  It does not necessarily mean creating bold advances in
technology.  It means taking bold advances in our imagination.  If we can
achieve that, then a games sucess is assured.

John Seghers
Consumer Software

There are 2 new users on the systems. Now if you have a beef, wanna stand on
a soap box, feel like sending congrats for a job well done or whatever, you
will be heard by someone who can make a difference. Don't feel intimidated.
These guys are intrested in hearing your input. They wanna know what's 
happening; that sort of stuff.

John Farrand can be addressed as KIM::FARRAND and Skip Paul can be addressed
as KIM::PAUL. They get JUNK mail too.

	ds

                          The Bubble Bursts

          From 1979 to 1982 Atari's growth was exponential.  The money
     was flowing in and we were the darling of the business community.
     A group of congressmen who saw High-Tech as  the  answer  to  the
     country's  economic  woes  adopted our name.  Ray Kasar's picture
     was on the cover of most the major magazines in the country.

          There is a problem  with  exponential  growth.   If  Atari's
     sales doubled every year our sales would have been $1 trillion by
     1990 and $1 quadrillion by the year 2000.  A little common  sense
     would  have  indicated  that  that  kind  of  growth could not be
     sustained and, I suppose, if you  had  asked  our  planners  they
     would  have  agreed  that a leveling off would be inevitable.  We
     all seemed to be a bit too busy to worry about that at the time.

          In ancient Greece, a  general  who  received  bad  news  was
     allowed  to  kill  the  messenger.   History  does not record how
     reliable the mail  was  in  those  days  but  the  temptation  to
     minimize  the  bad  news  must  have  been  overwhelming.  If the
     newspaper accounts are any  indication  we  had  a  very  similar
     problem  here.   If  a  market  forecast  had  indicated that the
     industry would be in the state it is in now the forecaster  would
     have  been  replaced  by someone with " a better attitude".  This
     approach guarantees surprises.

          I think it is obvious that video games were a fad  and  that
     the  fad  is over.  There are, however, two kinds of fads.  These
     are exemplified by the Frisbee and the hoola hoop.  In  the  late
     fifties the hoola hoop exploded on the scene with a force that is
     legendary to this day.  For about two years everybody had to have
     a hoola hoop.  How many hoola hoops do you see today?  None.  The
     fad ran it's course  and  returned  to  oblivion.   The  Frisbee,
     however,  suffered  a  different  fate.   If gained in popularity
     slowly at first and then reached explosive popularity later.  I'm
     sure  Wham-o  doesn't  sell as many Frisbees now as it did in the
     late sixties  but  the  Frisbee  is  now  part  of  the  standard
     repertoire  of picnic supplies and kids still play with them.  Is
     the video game a hoola hoop or is it  a  Frisbee?   For  all  our
     sakes I hope it is a Frisbee.

                        What's in the Future?

          Other then examining the entrails of a chicken, there  seems
     to  be  no  reliable  method of predicting where this industry is
     going to go.  Coin-op can make a profit and survive  on  what  we
     sell to arcades.  There is shake out in the arcade business right
     now so that avenue has dried up.  This should only be  temporary.
     The  really  big  bucks  come  from street locations sales.  This
     market seems  to  have  vanished.   Coin-op  is  addressing  that
     situation  and time will tell if the street market can be revived
     or not.  I hope so, but I also think it would be unwise to  count
     on  it.  We should view street sales as icing on the cake and the
     arcade business as our main course.
                                                                 Page 2


          There are a couple of indications that the  arcade  business
     is  going  to  stay around a while.  Our operations end is making
     money.  This is at a time when other arcades  are  losing  money.
     Our  arcades  bring in the latest games.  Many or our competitors
     do not.  National surveys indicate that collections are down  and
     I believe it is a direct result of player boredom with old games.

          A player  survey  in  Play  Meter  magazine  indicated  that
     players  will pay 1 dollar for 4 tokens at an arcade that has new
     games rather then get 10 tokens for a dollar at  an  arcade  that
     does  not.   This  magazine  is  read by almost all operators and
     perhaps the message  will  start  to  sink  in.   We  have  other
     evidence  that  new  games generate revenue for the operator.  We
     currently have several games  on  field  test.   The  collections
     reports  that  I've  read  indicate  that these games are earning
     about $100 more a week than field test games did last year.  This
     could  mean  that our games are very strong or it could mean that
     the game playing populace is starving for new games.   I  believe
     it  is  a combination of both.  Survival of the fittest indicates
     that those operator who invest in  new  games  will  survive  the
     shake  out.   This trait will be selected for and we can look for
     reasonably level sales from these operators.

          Many well meaning operators are  suffering  a  serious  cash
     flow  problem  at this time.  They want to buy new games but they
     can't.  I think Atari should help them out.  In the early days of
     the  automobile  the  car companies realized that the customer is
     willing to borrow to get a new car.  General Motors  set  up  and
     still runs the GMAC which lends money to new car buyers.  GMAC is
     a profit center itself and has helped GM make  a  great  deal  of
     money  in  the  process.  This system could work for us.  Federal
     banking laws have been relaxed a bit lately and it may be  easier
     to  do  this  then  it  has  in  the past.  Perhaps a cooperative
     venture with an established institution will serve.

                       Thoughts on the Lay Offs

          I personally feel very bad about those who have  lost  their
     job  recently.   It  is a shame that some other way couldn't have
     been found.  I realize that a great deal of  budget  cutting  was
     done  before  any  lay  off  occurred.   I only hope that in this
     chronic belt tightening we don't risk breaking off at the middle.

          If we are not well poised for the future, we risk  repeating
     our  mistakes.   There  are  new  markets  to enter.  If Atari is
     moving we increase our chances of hitting  a  moving  target.   I
     feel that new games are important.  I also feel that we should be
     ready to create the next era in entertainment.