Or, aside from that, you could argue for investing that money in other things. (like R&D and/or advertising . . .or manufacturing -especially given the shortages that plagued the ST several times in its life)
Apparently, there will never be an end to second-guessing the Tramiels, with 25 years of hindsight. Honestly! I'm not here to defend Tramiels, but this just never seems to end. The Federated purchase was a mistake, but what semiconductor manufacturer could have been purchased for the price of a tiny, failing retail chain? It's as if we're to pretend that back in 1985 (when we were 15 years old, 7 years old, or not even born - depending upon age of the reader here) we should have been calling the shots from within our child skin, with 2012 knowledge. We're also to pretend that Atari wasn't a tiny company on a shoestring budget. The reality - once again - is that while there were PLENTY of mistakes made, but in the bigger picture, it's kind of a miracle that they were able to cobble together what they did with as little as they did, and I am glad! Lots of other people would have made worse decisions, and would NOT HAVE BEEN ABLE to make a go of it and make Atari last the time that it did, when forces (that are evident to us now with hindsight) were so stacked against them, as we now know. I think we should LIMIT the criticisms to small, managable ones..... They should have put 720K floppy drives in the ST from the start. They should have made RAM expandable on the first STs. Let's limit it to possible, plausible arguments.
Federated wasn't cheap. Once factoring in the costs of closing it down, it was around $250-$350 million. And yes, a chip fab company [or two] could've been purchased for that price.
A disagree on the 360k drive issue, it was necessary for offering low cost (especially early on) and establishing the ST successfully as a low-cost high-performance machine. (especially in the price-sensitive European market)
Although I do agree with you that there never should've been a 360k disc drive option. But a machine like the MegaST should've been rolled out in 86 and not 87...
However, I also think they should have prominently offered a 720k option from day 1 (among the other things mentioned above -desktop form factor, higher-end models, built-in and external HDD options, more provisions for expansion, and possibly even lower-end models -for the entry level and especially low-end market in Europe . . . aside from the hardware issues like scrolling/chunky pixels/DMA sound) And there's the missed potential for disk/file-level PC compatibility too. (and offering optional 5.25" drives to cater to that)
And hell, mainstream PCs were still only using 360k DSDD 40 track 5.25" disks (with IBM introducing 1.2 MB HD 5.25" disks on the high-end PC/AT range in '84) and early Macs were only 400k too. (so Atari still ahead of mid-range PCs in that respect -and almost every other respect too, save expandability . . . and 3rd party software support, and obviously at a fraction of the price of such PCs -or at least moderately cheaper and much more capable than the Tandy-1000 -which were the only really value-oriented PCs availalble at the time, though even those had the advantage of expandability -albeit with proprietary cards in the case of the HX/EX console models)