Here are some quotes from Steven Kent's book, "The First Quarter":
"On December 7, 1982, Atari announced it expected a 10 to 15% increase in sales in the fourth quarter. Until that announcement, Atari executives had been talking about an increase of 50%."
"Atari had deeply rooted problems that eventually infected the entire industry...Atari became top-heavy with marketers and other executives...some executives began to think that they could sell anything as long as it came packaged as a video game. "
"The first indication of trouble came in May, 1982, but no one seemed to notice. Atari manufactured 12 million copies of Pac-Man even though the company's research showed that less than 10 million people actually owned and used their 2600s..."
[The book goes to explain that Steve Ross, head of Warner communications, made a deal with Steven Spielberg offering him $25 million for E.T., wether the cart did well or not. The cart was rushed out for christmas release and when it did it flopped miserably.]
"...the majority of E.T. cartridges remained dead in inventory."
"Consumers had already begun losing interest in video arcades, and in 1983, they stopped purchasing video games."
"Atari was stuck with enourmous inventories of worthless game cartridges...By the end of 1983, Atari racked up $536 million in losses."