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April 8, 1996

ATARI QUASHES TALK OF JAGUAR CONSOLE AND CD-ROM AUTHORING UNIT’s DEMISE AS JTS REVERSES INTO IT

By CBR Staff Writer

Atari Corp has become the architect of a reverse takeover and contrary to reports of the units’ demise, it is not selling off its games assets nor, it insists, has it any plans to do so. Following negotiations of an investment in disk drive manufacturer JTS Corp, the two engineered a reverse takeover in which Atari founders, Jack and Sam Tramiel and their shareholders, ended up with 60% of the enlarged firm. Gossip quickly circulated that Atari was to discontinue its $100 64-bit console, Jaguar, and scrap its personal computer CD-ROM authoring division, Atari Interactive. Such a drastic move would leave 150,000 Jaguar users high and dry and renege on some $7m in outstanding title development contracts. The on-line publication Multimedia Wire reported that it learned of discussions between chief executive Ted Hoff and several major Atari shareholders to take the video game portion of the business private. Those discussions subsequently fell apart, the publication reported. However, the company later rejected the claim, saying those are the words of a disaffected ex-employee who is being sued out of existence. The rumors, sparked by the sudden departure of Hoff in January, were categorically denied by chief financial officer August Liguori. We were in the video game business a long time before Ted joined us, he said. Just because he’s gone does not mean that we are quitting the business. We’re not closing anything, it added. Jaguar will be supported for the time being and new software will be launched for it in time for Christmas. If it sells in 1996 it will be maintained well into the future. Atari claims it still has several valuable licenses, the historical wealth of the company’s background and potential income from copyright infringements, such as the $90m royalties settlement from Sega Enterprises Ltd. JTS, designer of low profile cartridge disk drives, is not quite the razzmatazz company that might be associated with Atari. Atari arguably authored the video game industry with Pong, the world’s first bat-and-ball game in 1976, continuing with classic titles such as Defender and Tempest. However, Atari has been dogged by ill fortune despite winning the approval of heavyweights such as Virtuality Group Plc and the JTS deal may provide it with the muscle needed to push its games hardware further into the public eye. Atari still has a significant cash balances – around $50m – and it is extending a $25m bridging loan to JTS. In the event that the merger is not completed, the loan will be convertible into JTS Series A preferred shares at the option of Atari or JTS. The new company will take the JTS name and Jaguar games machine business and the JTS disk business will operate as a separate division. Tom Mitchell, president of JTS Corp, was a co-founder of disk maker Seagate Technology Inc.

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