1984 was the end of the gaming boom.  The "Crash" as it is called, was mainly caused by Atari itself - 1984 was the year Atari bombed out of the Dow Jones for the second time.  The computer division seemed to be getting things right, although desperate indecision had spread it's resources too thin and rivals such as Commodore had taken the lead.  Legal disputes with Texas Instruments and software companies such as Activision and Imagic were distracting the company and sapping it's energy once more - AtariTel was still going nowhere (a grandiose Atari networking plan), prices were too high and other projects were getting lost in the confusion as direction became blurred.

It was time to re-group.  Staff were cut, whole departments went and budgets were cut to the bone, manufacturing was moved to the far east. (Alan Alda didn't appear in any new TV ads).  Atari had wasted an entire year with the 5200 and 1200XL, in 1984 they were a year behind - a year they didn't have.  Initiatives such as Atarisoft went some way in picking up the pieces, but at the Consumer Electronics Show in Chicago that summer of '84, buyers and retailers weren't happy.

Atari decided to put it's stand in hall one, where the likes of IBM hung out - this simple decision upset Atari's main market, their gamers.  At the show the 7800 launched officially, and as one major buyer said "Just what I need, still another format for Pac-Man" - No software manufacturers had pledged support for the 7800 system, Atari were on their own.  Even rival Coleco was in trouble, it's computer system "ADAM" had become an industry joke, and the Coleco-Vision console was nearing the end of it's life - the only noise at both the Atari and Coleco stands was that of stockholders biting their nails...

Warner Communications was quietly looking for a buyer to take Atari off their hands - Jack Tramiel was on his way to see the board of Warner...