The Federated Group - How did it affect Atari?

[pacman000]

Wondered a while now how Atari Corp's purchase of The Federated Group afftcted Atari. Found this today: https://www.atarimagazines.com/st-log/issue25/03_1_EDITORIAL.php

 

Basically confirmed part of my suspicions; owning their own stores hurt relations with their dealers. I'd like to know how it hurt their finances. How much money did Atari sink into the Federated stores? How much did they make/loose?

[+x=usr(1536)]

Wondered a while now how Atari Corp's purchase of The Federated Group afftcted Atari. Found this today: https://www.atarimagazines.com/st-log/issue25/03_1_EDITORIAL.php

 

Basically confirmed part of my suspicions; owning their own stores hurt relations with their dealers. I'd like to know how it hurt their finances. How much money did Atari sink into the Federated stores? How much did they make/loose?

 

IIRC, they sunk something like $76 million into the acquisition, doubling that amount trying to keep them afloat.

 

That said, they made awesome commercials. My guess is that a large chunk of that change went into the amount of cocaine necessary to get Shadoe Stevens into the role:

 

[towmater]

I remember a Federated ad in the LA Times advertising the 1400xl. I remember it because I wanted it so dearly.

[calimero]

You can find numbers in SEC fillings. Here I left link for one from 1989. (other can be also found on web.archive.org)

 

Atari Corp lose more then 100$ on Federate Trade and in my opinion it was deadly mistake. They never recover from it.

[towmater]

Atari Corp lose more then 100$ on Federate Trade and in my opinion it was deadly mistake. They never recover from it.

 

They felt they had to try, as they had a hard time finding mainstream computer retailers who would feature their products.

[calimero]

 

They felt they had to try, as they had a hard time finding mainstream computer retailers who would feature their products.

 

 

I am from ex-SFRJ Yugoslavia so I do not know how Atari, or Commodore, or Apple sold computeres back in 80s

My father and I went to Munich, Germany to buy ST in 1986. As I remember many stores with electronics gear did have Atari ST (as other computers). It was no problem to find ST in stores. You walk in store, you could try computer on shelf, consult with seller, pay and take computer...

 

I am not sure how Atari ST was sold in USA? Only in small computer stores run (usually) by owner?

How Amiga or Apple was sold in 80s?

[Goochman]

I wonder if using $100M back then to buy you way into mainstream stores like Egghead and such wouldve been a better use of funds vs Federated. It was a total disaster from what I remember.

[pacman000]

"I am not sure how Atari ST was sold in USA? Only in small computer stores run (usually) by owner? :)"

 

As I understand it, yes. Atari had a small dealer network in the US, but they wanted to get into mass merchants, like Commodore did with the C64.

 

There's a video in the 7800 forum, listing Atari's profits from '87 as $44 million. Assuming they made as much in '88 & '89, it sounds like this deal was bad enough to wipe out three years of profits. Does anyone know what Atari's profits were like in '88 & '89?

 

Article from '89, when Atari decided to unload Federated: http://articles.latimes.com/1989-03-13/business/fi-395_1_consumer-electronics-products

[zzip]

 

 

I am from ex-SFRJ Yugoslavia so I do not know how Atari, or Commodore, or Apple sold computeres back in 80s

My father and I went to Munich, Germany to buy ST in 1986. As I remember many stores with electronics gear did have Atari ST (as other computers). It was no problem to find ST in stores. You walk in store, you could try computer on shelf, consult with seller, pay and take computer...

 

I am not sure how Atari ST was sold in USA? Only in small computer stores run (usually) by owner?

How Amiga or Apple was sold in 80s?

 

The ST sold much better in Europe, especially Germany.

 

In the US, I had to mail-order mine. There were few local stores that still carried Atari, and I was in a decent sized metro area.

 

At one point Atari was mass-market here, but after Tramiel bought the company, more and more of the big retailers started getting rid of it. Eventually it was only a handful of small computer retailers that had it.

[Wayneb123]

I liked Federated Group as a store, it was my favorite of all the Southern California chains, I believe when Circuit City came out this way it doomed them, I got my first Commodore 64 there and also my first Atari ST. They sold computers before Atari bought them. They sold Amiga and IBM computers also.

 

We had stores like Compterland and Business land that sold IBM and clones, I believe I saw Amigas in the early years, after that only small shops sold Atari or Amigas around here.

When home computers started really taking off we had new chains like CompUSA and Computer City selling PC and Macs only, it seemed like there were small computer stores on every block selling clones and computer parts. I lived in Orange County California, and area with 2.5 million people, in the later years I had to drive to LA to get Atari hardware.

 

Many people didnt know Atari existed other than from the gaming systems, I had people tell me my ST was a toy and PCs were real computers, blew my neighbors mind when I showed him my Atari doing stuff his XT could only dream of, telling him what it cost was fun also.

[Wayneb123]

Federated used to bargain on prices, I would ask for a deal and the salesman would bring out a binder with all the pricing information, it had listed regular price, last sale price and the minimum they would take, none of the other stores that came after them would bargain like that. I used to shop at the Westminster store.

[ilaskey]

Talking to various people in Atari UK at the time, I think the biggest impact was it took huge amounts of management attention and that was when they lost the thread on the ST Series. By the time they exited Federated, the ST had started to die. They told me they should have paid far more attention to upgrading the ST much earlier but they were just too wrapped up in Federated to see what was happening.

[MrMaddog]

Talking to various people in Atari UK at the time, I think the biggest impact was it took huge amounts of management attention and that was when they lost the thread on the ST Series. By the time they exited Federated, the ST had started to die. They told me they should have paid far more attention to upgrading the ST much earlier but they were just too wrapped up in Federated to see what was happening.

 

I agree, they should have focused more on selling through smaller dealers and marketing to the home/small business sector in the States. Even without PC compatibility, the ST's were damn useful machines at the time...

 

Another distraction was trying to compete against Nintendo in the closed off video game business.

[Wayneb123]

What I think Atari needed to do was make a push for the schools like Apple did, an Atari ST was a superior machine to the Apple II computers schools were using.

Kids would tell their parents they wanted a home computer like the one they would use at school.

 

I liked Federated Group as a store, I understand why Atari wanted a guaranteed distribution chain but they chose to buy into a very competitive business that failed due to tremendous competition. The store that replaced Federated where I shopped also went bankrupt(Silo) and the business that came after that second failed business also went bankrupt (Circuit City) Atari lost a ton of money when they owned Federated, it was a terrible business decision to buy them but it was not like Atari was very well known anyway. Had they pursued the education market they would have had much better name recognition as kids would be begging their parents for an ST.

 

It is also a shame that Atari didnt try and market an expandable system like Commodore did with their big box Amigas, the Megas and TT were nice but they needed a much more expandable machine to target businesses.

[towmater]

 

I agree, they should have focused more on selling through smaller dealers and marketing to the home/small business sector in the States.

 

Tramiel was known for selling a bunch of stock to dealers for $x, then dropping the price of the computer to x/2, leaving the dealers stuck to sell the gear at a loss, or lose the sales entirely to those that bought at the new low prices. I don't think they welcomed further dealings with anything Tramiel, so his answer was essentially "screw 'em, we'll make our own retail network."

[MrMaddog]

 

Tramiel was known for selling a bunch of stock to dealers for $x, then dropping the price of the computer to x/2, leaving the dealers stuck to sell the gear at a loss, or lose the sales entirely to those that bought at the new low prices. I don't think they welcomed further dealings with anything Tramiel, so his answer was essentially "screw 'em, we'll make our own retail network."

 

Exactly, so Jack end up screwing himself & Atari overall... And even if Federated hadn't been a money pit, how would only selling their computers in a small corner of the country instead of nationwide via dealers would have been good business sense?

 

True story: I only heard about ST's in Atari magazines and never seen one in person till I came across a very small computer store in a mall. A couple years after I got one there, Atari stopped supplying them completely! Only thing that kept the store open was the PC's everyone else were interested in instead.

[atarian1]

Buying Federated was one of the reasons why Neil Harris left Atari even though he worked well with the Tramiels back at Commodore and then at Atari. He didn't understand why the Tramiels were using an analogy of when Commodore owned some computer stores that it would be the same with a big chain of stores. All the details are in his interview on the Antic podcast.

[pacman000]

"And even if Federated hadn't been a money pit, how would only selling their computers in a small corner of the country instead of nationwide via dealers would have been good business sense?"

 

I thought Federated was nation wide, with stores concentrated in the California. At the very least I know there were stores in Texas.

http://articles.latimes.com/1989-04-05/business/fi-1001_1_federated-group

[Lynxpro]

The Federated Group was on the Pacific Coast and in the Southwest. Not to be confused with Federated Department Stores Inc which owned plenty of big clothing retailers on the East Coast back then.

 

They had great commercials prior to Atari Corp's purchase. The commercials featured Shadoe Stevens as Mr. Fred Rated. Jack Tramiel sh*t-canned that after the takeover. There's a Federated employees group on Facebook. The former employees overwhelmingly hate Tramiel although it was Federated's management that cooked the books and roped Atari into buying them as a way to keep the doors open. It was basically fraud and Atari Corp lost their shirts over it.

 

Remember, back then, computer stores in the US were dropping the ST because Atari Corp was shipping 80% - 90% of STs over to Europe and that was because the Reagan Administration had slapped tariffs on Japanese DRAM in retaliation for price dumping years before. Unfortunately, almost all of the American DRAM manufacturers had already exited the market because they couldn't compete with Japan Inc's anti-competitive business practices. Micron was still afloat but Atari Corp was suing them over supposedly breaking a verbal contract over prices between Jack Tramiel and Micron's CEO. The European Community was not slapping tariffs on Japanese DRAM at the time thus the ST was primarily shipped there instead. This caused a lot of American dealers to drop the ST and push the Amiga, especially when the Amiga 500 debuted. So purchasing Federated was seen by the Tramiels as a defensive measure and to have at least one big box electronics retailer push Atari hard.

 

Even long before the purchase, Federated carried the ST. They pretty much exclusively sold the PS3000 monitors that are collectors items today...hell, they were collectors items back then too!

[pacman000]

Is there a link to that FB group? I don't like FB; it's too slow/bloated, but it might be nice to read some of their posts.

[Lynxpro]

Is there a link to that FB group? I don't like FB; it's too slow/bloated, but it might be nice to read some of their posts.

 

https://www.facebook.com/groups/112444754991/

 

There's some gems in there to learn about. Like how the screenwriter of Ruthless People was a former salesman in one of their SoCal stores...

[+David_P]

Here's a (non-Atari) story about Federated Electronics in the early 1980s... apparently, their customer service needed a bit of work.

 

https://www.newsfromme.com/2021/10/15/tales-something-6-2/