The Atari XE systems were the logical upgrade to the XL line of Atari 8-Bit systems.  In order to utilise existing parts, and to ignite sales of Atari products after the XL inventory was exhausted, Atari engineers were able to quickly design a new line of 8-Bit products for sale in 1985.  In fact, the 130XE was the first Atari computer to be produced entirely by an automated manufacturing process, which was a major factor in reducing the computers cost.

Of the new XE systems, 2 machines were launched immediately.  The 65XE with 64Kb of RAM, and the 130XE which had 128Kb of RAM.  The design of these new machines ensured backward compatibility to the previous 8-Bit computers and more importantly, they were very cost effective to manufacture.  Both machines sported the same new look case design, which mirrored the ST line in aesthetics.

The design of the XE computers proved there was still a market for 8-Bit home computers, and while not as popular as the Commodore 64, the XE range was a huge seller in Europe, especially in  Eastern Europe countries where Atari could really sell power without the price.  Seeing a huge market In the old Eastern block states, Atari further reduced the cost of the XE computer and sold it as the 800XE, which was identical to the 65XE.  It was manufactured for approximately 18 months via a Chinese OEM from 1990-92 and most units contained a buggy version of the GTIA graphics chip.

Technically, only minor modifications were made to the silicon of the XE computers over the older XL range.  No major changes were made that improved on the XL range in any significant way, apart from the new memory management chip called "Freddy" (a chip already designed under Warner for the higher end XL systems), and a cost reduced expansion connector called the Extended Cartridge Interface or ECI, which wasn't present of the lower cost 65XE in the USA. (although in Europe, most 65XE's did have this expansion port).  The 6502 CPU was the low power consumption model.

The whole point of the XE line was to keep Atari in the 8-Bit market as cost effectively as possible, and make as much profit from the lower end of the market while it was still viable.  Atari already had a significant market share here, and there was no reason to abandon it to the competition.

From another standpoint, existing Atari 8-Bit users were glad to be supported for another 6 years or so, and although the XE line was not a priority within the company it did develop further products for the significant user base already installed.

The only further development within the XE line was the launch of the XEGS, which you can read about here.