Atari, the Sunnyvale, Calif.-based company that is the nation's largest producer of personal computers and video games, is expected to announce today that it will introduce a line of home telephones that blend communications with personal computing capabilities.
This would pit the Warner Communications subsidiary directly against American Telephone & Telegraph Co. for a share of the fast-growing home telephone marketplace--a market that several analysts estimate will be worth half a billion dollars by 1985 and triple that by the end of the decade.
The new product, which Atari developed under the code-named Project Falcon, is basically a telephone with a video display and an attachable keyboard that would let the user send typed electronic messages, play videogames and work jointly on computer tasks over phone lines with other Falcon owners. Falcon would have an array of so-called "smart-phone" options, from automatic redialing to monitoring the home thermostat. Essentially, Atari has approached the telephone and transformed it into a computer that communicates.
Falcon is expected to be on the market by the end of this year with prices beginning at about $300.
The product has reportedly been in development for two years and will become Atari's "fourth earnings leg," says Warner Communications President Emanuel Gerard. The other legs are Atari's home computer division, the consumer electronics division (which includes videogames) and Atari's arcade coin-operated games group. In 1982, Atari had revenues in excess of $2 billion with operating profits of $323 million.
"This could be very important for Atari," says Lee Isgur, a research analyst with Paine Webber. "The company is taking advantage of its name and its distribution channels to enter a growing new market. This will be one of the really great markets."
Though Atari will not officially release technical details, sources both within and outside the company indicate that the phones would integrate computer power with communications abilities. A consumer would buy a base Falcon unit and then purchase add-ons or peripherals to expand the unit's capabilities--much as personal computers require peripherals such as disc drives to expand their performance.
Falcon is the incarnation of a technological trend that has become increasingly clear over the past few years: the merging of computer and communications technologies. This merger has been the driving force leading the Federal Communications Commission to its decision to let a restructured AT&T offer computer services to its regulated telephone network.
The commission, in several Computer Inquiry proceedings, tried to draw a line between what is communications and what is computations because the commission was empowered to regulate the former, but found this extremely difficult to do. For example, with a device called a modem, a computer can "talk" with other computers over the phone lines. Does this make the computer then a phone? The difficulty in resolving these questions helped prevent AT&T from turning its telephones into computer phones.
Now, with the divestiture of AT&T and the ability of AT&T customers since 1977 to own, rather than lease, telephones and other "customer premises equipment," AT&T, through its American Bell subsidiary, is in a position to market computer phones.
Other companies, such as Tandy/Radio Shack and General Telephone and Electronics, will also market "smart" phones.
Peter Wensberg, who will head up Atari's new telecommunications division, says the company will seek out local telephone companies as marketing partners for Falcon as well as using Atari's existing retail chain of distribution. No indications as to the size of Falcon's advertising or promotional budgets were given.