The Zinger of Silicon Valley

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Morgan uses drastic measures in an attempt to save Atari

Few companies have risen so fast or crashed so rapidly as Atari, the onetime king of video games. From 1977 to 1982, annual sales zoomed from $200 million to $2 billion. But last year Atari lost $536 million in just the first nine months. Atari's collapse has left its parent company, Warner Communications, so weak that Warner is fighting for its life in a corporate takeover battle with Press Lord Rupert Murdoch. James J. Morgan, 41, then a vice president of Philip Morris, was hired last summer to rescue the ailing company. TIME Correspondent William McWhirter, a Princeton classmate (1963) of Morgan's, spent a week with Atari's chairman and filed this report:

The company Morgan found when he arrived in California consisted of a dozen separate corporate satrapies devoid of planning or consultation. At least 49 Atari buildings were spread around company headquarters in the Silicon Valley sprawl of Sunnyvale, Calif. Often the heads of those far-flung divisions were not even located in the Atari headquarters building. The company had to call in a management firm to locate some 48 engineering groups in the U.S. It found a one-man operation in Louisville, apparently there because that was where the engineer preferred to live. The company had five finance departments, each with its own legal and personnel offices, three model shops and three mechanical-engineering units. Three or four sections worked on the same project, independent of each other. Since there was no standard pay scale, salaries and bonuses were dispensed as largesse.

The company was "a minefield of personal intrigue and corporate politics," according to newly named Atari President John Farrand. Concurs Atari's top scientist, Alan Kay: "For a while, the company was playing 'Ha, ha, your end of the boat is sinking.' " But when the bad news became clear last fall, it turned out that everyone was in the same boat.

The choice of Morgan, a marketing wonder but a complete outsider to both Atari and computers, at first seemed like another bizarre Warner decision. Morgan was an Easterner in a Californian's game, a traditionalist in a rootless industry, a believer in long-term growth in a market hooked on quick profit and instant gratification, a technological skeptic among scientific true believers. Morgan had run the Philip Morris tobacco-marketing division, whose products included such fast-rising brands as Virginia Slims and Merit, with an almost ostentatious lack of computers. He preferred writing meticulous longhand notes on legal pads to punching numbers into a machine.

If Atari's offer seemed baffling, Morgan's acceptance was even more unexpected. By all accounts, he was on a very short list for the presidency of Philip Morris. Yet Morgan, who had previously never even listened to outside offers, resigned 48 hours after having lunch with Warner Chairman Steven Ross.