ZAP! The Rise and Fall of Atari. Cohen, Scott, McGraw-Hill, New York, 1984, 175pp., $12.95

In early 1972, an ambitious but naive young engineer, with $500 an an idea for applying video technology to the coin-operated amusement business, founded a company called Syzygy. The company's name was changed to Atari, and four years later it was sold to Warner Communications Inc. of New York for $28 million.

Warner's cash got Atari's products out of the labs and onto the shelves of retail stores. Atari became the fastest-growing company in U.S. history. By 1982 sales were $2 billion and profits were over $300 million. Atari was the fair-haired boy of Wall Street, the archetypical American success story.

By 1982, however, those naive young engineers whom Warner management called amateurs had been replaced by East Coast pros. These guys did not even play video games, much less understand the technology of creating them. Within two years Warner lost all its staggering profits from the Atari heyday, plus an additional $400 million to boot.

Clearly Warner's management did what it felt was right, and in fact Atari earned its largest profits after it had replaced many of the original managers with people of its own choosing. But the lid was being nailed on Atari's coffin back in 1979, when innovation ceased. No new products were released from then on.

Atari's story is exciting, but this book falls far short of being an accurate analysis. It is entertaining and can be read in about two hours, but it lacks insight and depth. It is neither a technical management study nor a true explanation of Atari's demise. It is merely a chronology of Atari from its beginning to its end in late 1982. The author, a magazine writer who lives in New York City, seems to have written the book to cash in on the Atari story while it is still hot. His sources are newspaper and magazine articles, along with interviews with 18 people, 10 of whom were actually at Atari. Although the many lengthy quotes from knowledgeable sources give the book a flavor of truth, this reviewer was concerned by many inaccuracies and omissions.

For example, the near demise of Atari in 1974 is completely overlooked. Nolan Bushnell, Atari's founder, had replaced the young management team with some professionals from Hewlett-Packard Company of Palo Alto, California. Mr. Bushnell had overlooked the fact that success had been due in large part to a young management team (whose average age was 30), who would take risks, who worked in an atmosphere of complete communication, and who were naive and gutsy enough to do something that, by conventional wisdom, should not have worked. Six months later Mr. Bushnell reinstated these same young, inexperienced engineers whom he had replaced, in order to save the company.

The author also demonstrates very little insight into the more recent troubles at Atari. One of the more significant events was the drop in forecast earnings for 1982 from $5.25 per share to $3.96. The low earnings reflected a tremendous drop in sales and profits resulting from the saturation of the market for the VCR (video cassette recorder) and the stiff competition facing Atari. Atari and Warner management were oblivious to this fact until the second week of December 1982. Shareholders sued several executives for selling Atari stocks only a few days before announcing the reduced earnings. These events indicate that accounting, as well as creative talent, was mismanaged.

The author mistakenly attributes the company's failure to Perry Odak, vice president of the Consumer Division of Warner. Although he was fired the same day the earnings announcement was made, it is more likely that he was a scapegoat for the company's problems rather than a cause of them.

The real Atari story has yet to be written.
-- Allen E. Alcorn

Allen E. Alcorn (M) founded Atari along with Nolan Bushnell and was vice president of research and development from 1972 to 1981. He is currently vice president of engineering at Cumma Technology Inc. of Portola Valley, California.