September was crazy, and I got behind. To apologize, I’ll be publishing two interviews this week. We’ll start with this Tramiel interview.
from the February 1985 issue of Family Computing magazine
by Nick Sullivan
THE FOUNDER OF COMMODORE IS NOW THE CHIEF OF ATARI, BUT THE GAME’S THE SAME: HOT TECHNOLOGY AT ROCK-BOTTOM PRICES!
Tough-talking. cigar-chomping Jack Tramiel is one of those great American stories. He made it to the top, and he made it on his own. “We live in an industry where people still have dreams of becoming millionaires. I’m living proof that it can be done.” Stories like his are always fresh because the people who author them are always originals.
Tramiel was born in Lodz. Poland. He came to the U.S. in 1947, and started out driving a cab in New York City. While in the Army, he learned how to fix adding machines and typewriters. In 1955 he moved to Canada, and three years later started his own typewriter-repair company. Commodore Business Machines Ltd. By 1983, Commodore’s revenues were more than $1 billion: Tramiel was president. In January 1984, after a dispute with the board of directors about the company’s future, Tramiel shocked the industry with his resignation.
In July, he and a group of investors bought the ailing Atari, Inc. from Warner Communications. Tramiel says he’s pumped $30 million (”out of my pockets”) into Atari, has another $43 million on call, and plans to raise another $150 million in the next year-and-a-half. Atari, he says, will be a billion-dollar company by the end of 1985. Judging by initial response from the financial community, all this will be a tall order even for a man with Tramiel’s track record.
Earlier this winter, Tramiel invited FAMILY COMPUTING to his office for a private talk, in which he outlined his four-pronged approach to the computer market. He expects to keep the Atari videogame business going, and says he’ll keep selling and improving the Atari 800XL line. His plans also include a computer with a mouse that operates somewhat like the Apple Macintosh, but with color, and a price tag under $500. Later, he’ll bring out a more professional color-graphics computer (less than $1,000) for architects, engineers, and designers.
“I’m out to bring some life back to the Industry!” says Tramiel. with a bellowing laugh. Out in Silicon Valley there’s already new life. The word is, “Jack is back!”
FC: Where does your fascination with computers come from?
Tramiel: I’ve been involved in computing since the day I joined the U.S. Army. That was on Governor’s Island in New York. I was repairing office machines. When I left the service I started working for a typewriter/adding-machine company. Then I became a distributor of typewriters and adding machines. Then I went into assembly of typewriters and adding machines, with my own company. So to me, adding machines are computers. Mechanical computers.
As the technology moved. I moved along with it. Then I sold my mechanical adding-machine business and I started to buy and sell electronic calculators. And from electronic calculators I started making computers.
So all the time I’ve just been upgrading, because I believe a person should never put his nose into the sand and say, ‘This is it.’
FC: How did you come to buy Atari?
Tramiel: I did not look for Atari. Atari was looking for me. In June I was called by the investment bankers of Warner. We came to an understanding. It was a good deal for both groups, and I bought Atari.
I started a business when I left Commodore called Tramel Technology. So, I didn’t have it in mind to buy Atari, but just to start a new computer business, which in my opinion the world needs.
FC: To do what? What do you want to achieve?
Tramiel: I want to have an Atari computer in every single home. I want every single individual to own one.
FC: And what about the business market?
Tramiel: No, I’m not Interested. I started in 1976 at Commodore by introducing a personal computer [Commodore PET]. Today, I still want to design, manufacture, and sell the best, lowest-priced computers in the world. And feed the world’s youth the best technology at the lowest price.
FC: Many people, in different types of businesses, set out to be the low-cost producer of a quality product. How do you win at this game?
Tramiel: It’s very simple. Keep a lean ship. Keep a very tight ship. I like to run things on a personal basis. I don’t like it — I hate it — when people are referred to by numbers. I still like to call people by their first name; I like to know everyone. I like to be involved, from shipping to finance, from engineering to assembly. And I want everyone else to be involved. I like to keep it small. Atari was losing $10 million a month when I came. There was a lot of fat to cut.
Also, it’s not in the selling. It’s in the buying.
FC: What kind of advertising message will convey to the American people the need for a computer in the home?
Tramiel: I don’t believe any message is required, because the age group I’m aiming at, 6- to 26-year-olds, knows it needs computers. The 20 million kids who bought Atari videogame machines, or VlC-20 computers, are ready to graduate. They know. Anybody over the age of 30. I call them over the hill. Those people have to be taught how to use a computer. Young people learn about computers in school. They come out and they need the tool.
So, I believe that the way to sell products is not through marketing but through technology.
FC: So you feel that all you have to do is deliver the product at an affordable price and it will sell?
Tramiel: Yes. I have done it before and I’m going to do it again on that basis, because I strongly believe that the buyer is extremely smart. And when he spends his own money, he wants to get the best return for his buck.
When a buyer who is 50 years old — that’s still young to me — goes out and buys a computer for his company, he’s not spending his own money. He just wants to be sure that no one will tell him he bought something wrong, so he buys an IBM to be safe.
If he works for a school or in government, he spends my tax money — my tax money! — because he’s scared to buy a low-priced machine with the same features, the same components, as an expensive machine. No different. No different, but one costs S200 and the next one costs $2,000.
So, because of this buyer’s inexperience, the company, the school, the government, pays more. But that same individual, when he spends his own money, is very careful.
FC: Will any of your new computers be IBM-compatible?
Tramiel: If we come up with brand-new technology — far advanced — which cannot be compatible, should we stop because Mr. X has an old machine? ‘Don’t you dare make a new one.’ Is that what people say? The answer to the question is No.
FC: ‘What are you going to do about keeping the price down on software for the home?
Tramiel: I have never allowed software to be sold at high prices. I made sure I sold all software at a reasonable price. And, I offered the software buyers volume. Some of them understood, some did not. But in time, they have turned around.
I don’t believe any piece of software — any! — should sell for higher than $49.
FC: How would you characterize the computer industry in 1984?
Tramiel: After I left the business in January 1984, it was dull without me. No price cuts, no technological breakthroughs!
The end-users are intelligent, know how to read, and know the value of products. These people know that there’s new technology coming out, they know that there’re better chips, they know there are better micros, they know the cost is coming down.
And, when they see that the manufacturer of the hardware is not bringing the price down, they know that if they wait sbc months or a year, the price will come down. So they wait. That’s the reason why “84 was such a bad year. Because I left the business in January, and everything became very stable. Nobody cut prices. Greed! Take as much as you can!
FC: How long will you keep the Atari 800XL line going? And can you tell us something about the new computers?
Tramiel: The new computers I will show in January at the Las Vegas CES and in March in Hanover, Germany. There will be number of variations in the 800 family, More memory, 128K. I believe very strongly that the 8-bit family is here to stay for quite a while — because a beginner does not need more than that. And all the new units will be upwardly compatible with the 800XL.
Internally, I can tell you, we call the new 16-bit computer RBP, Rock-Bottom Price! Very simple. Very direct.
FC: What is that price range in your mind? Is there a cutoff, a magic number?
Tramiel: It has to be far below $500.
FC: You said before that your market is 6- to 26-year-olds. But kids that age don’t necessarily have the money, do they?
Tramiel: That’s why I sell everything a la carte. I don’t believe in selling the whole system. The user can buy as he can afford — buy a CPU first, then a monitor, then a printer, then additional software. Whereas Coleco was trying to sell the whole system at once [the ADAM], I find there’re more people with $200 than with S600!
I’m trying to give people a chance to start, to build. There’s no end to what you can do with a computer. You can expand it as far as you want. If you buy a $200 CPU and spend an additional $5.000, maybe you can talk to your buddy on the North Pole.
FC: Will you bring out much software with these new machines? Or will you let the software catch up to the machine, as you did with the Commodore 64?
Tramiel: I definitely will not bring out a lot of software because that’s an impossibility. Anybody who tells you otherwise is a damn liar.
When we introduced the 64, we had very little software. Everyone was telling me how unsuccessful it was going to be. Now, to me, the only way and the- best way to encourage third-party software people is to tell them the number of units out there. To make them Interested in writing software. You see?
The computer is fun. It is friendly. The individual can do so many things himself with a CPU. He does not require a specific application. This Atari computer is not a business computer, which you use for receivables or inventory. The computer is not something that does one specific application, like opening up the toilet door.
You have to be creative.
FC: But not every Individual’s going to be a programmer. A lot of people are going to need software.
Tramiel: I’m talking about the kids from 6—26 who know! They can and do write programs, I’m not talking about people older than this, who are scared of the computer.
FC: Certainly that’s an unconventional view of the market. Most computer manufacturers going after the home market are going after young professionals in their 30s, or parents of young children, or both.
Tramiel: This is what makes a horse race.
FC: How’s your relationship with dealers?
Tramiel: We will be selling products to anybody with cash. People who don’t pay their bills have very bad relations with me. I would like to sell mostly through mass-market outlets. Mass marketers work on a much smaller profit margin than the boutiques.
FC: Who do you think will be your major competition in 1985?
Tramiel: Anybody selling computers. You know what I say: ‘Business is war.’
FC: What about in your price range? Do you see any Japanese competitors?
Tramiel: Japan is something I’m always afraid of. I have kept the Japanese out for a long time with my prices, and hope I can continue to keep them out.
FC: Do you plan on keeping a “think tank” atmosphere at Atari, with big names developing products?
Tramiel: No, we plan to have good people, who don’t have to have well-known names. The old Atari didn’t understand how to make a product. They understood how to spend money. They liked to spend money. They had big names, important people.
FC: Do you think you can make Atari come back as quickly as Iacocca made Chrysler come back?
Tramiel: I don’t recall exactly how long it took him. But, I am convinced that we will go into the year 1985 in the black. That’s less than six months work. Yes, we definitely are going to turn it around. There are a lot of differences between Chrysler and Atari, volume-wise and everything else. But it’s the same challenge, and it’s fun — to take something that was semibankrupt and turn it into a strong, profitable, major corporation.
FC: What about overseas — Australia, Canada, England, Germany, Japan . . . ?
Tramiel: . . . Kenya!
There’s no question that Atari is a worldwide organization, with companies all over the world. I would say that business for the old Atari was about 70 percent in the U.S. and 30 percent overseas. I’d like to make it a minimum of 50 percent overseas, and I’ll try for better.
I believe very much in having a strong international market. The world is round. When things are bad here, they are good somewhere else. So you don’t rely only on one market. It’s an International business, not a local business.
FC: Do you have sales projections or ideas about which markets will be best for you?
Tramiel: Yes, but not for publication. We have a very simple formula. Our business plans are always for 12 to 24 months out. But, we have only a 90-day firm manufacturing commitment. If, at any time, we see things back up on one product or increase on another, we can always change things in a 90-day span. In this business you have to be able to turn on a dime. You cannot be a battleship.
FC: During your reign at Commodore there was a high rate of returns on defective disk drives and computers. Do you feel there’s any chance that will happen again at Atari in your push to be the low-cost producer?
Tramiel: The only thing I can tell you is that I own a fancy car called a Jaguar. And I’ve received four or five letters from the company asking me to return the car for certain problems. I read in the paper constantly that Mr. Iacocca sometimes calls back hundreds of thousands of cars. There isn’t a product that isn’t recalled for repairs.
I’m not going to say, ‘No, it’s not going to happen, it’s going to be a perfect product!’ That’s not real. It doesn’t make a difference if it’s a Rolls-Royce. Just because it’s a low-cost product doesn’t mean there’s more chance to fail.
FC: What does the name Atari mean to you, in terms of image?
Tramiel: Atari, to me, is the company that started the whole boom in computers. It was the most successful company, which got in with their product [the Atari 2600 videogame machine) to 20 million homes. Nobody else has done that. I believe that the world’s youth has a love affair with the name. Atari’s a household name alt over the world, from Brazil to Mozambique, One of the strongest assets I bought from Warner was the name Atari.
FC: Do you have grandchildren, and do they use computers?
Tramiel: Yes. The 3-year-old uses it to play games. The 9-year-old uses it for homework in school. For all kinds of projects. And there’s a 5-month-old baby who doesn’t use it yet.
FC: What importance do you attach to telecommunications?
Tramiel: Very important. This is what I use to get all my stock information when I come home.
FC: Will you be doing anything to cut the cost of modems?
Tramiel: From the modems point of view, definitely yes. I do not control the telephone company as yet. As yet!
FC: What other areas do you see as important?
Tramiel: I definitely think that FM radio will become a very Important factor in communications. Instead of using the phone lines, you’re going to be able to use the FM airwaves. You’ll be able to transmit a lot of information from computer to computer. You’re going to be able to transport software through FM radio.
FC: Do you think that your reentry into the market means that in 1985 the home-computer industry will come back to life? Will people become excited again like they were two or three years ago?
Tramiel: Yes, because of what I can bring to the table — the right products, with my philosophy as far as price and features. Yes, the excitement will be there.
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