American Telephone & Telegraph Co. and Atari Corp. are negotiating an arrangement for Atari to put the AT&T name on some of its powerful ST personal computers.

The agreement would give privately held Atari a major customer for its new machine while giving AT&T a low-cost entry into the home and small business personal computer market.

"It would be a very interesting scenario," said Tim Bajarin, a personal computer industry analyst with Creative Strategies. "It could be great for Atari financially and provide an opportunity for AT&T to have a machine in the low end of the distribution channel.

Officially, both companies declined to confirm the negotiations. "We talk to a lot of people," said an AT&T spokesman, "But nothing is imminent -- and that is neither a confirmation or denial."

An Atari spokesman said that, "At this time, we have no comment as to negotiations or contracts to be signed."

However, other sources inside both companies confirm that discussions have taken place in California and one engineering source said that AT&T is in the process of checking whether Atari is technically capable of delivering its computers at a sufficiently low price.

Atari is run by Jack Tramiel, who guided Commodore International Ltd. to a billion dollars a year in revenue before leaving in a clash with the company's chairman and then buying Atari from Warner Communications Inc.

In January, Tramiel's Atari introduced its ST computers -- which were nicknamed "Jackintoshes" for their similarity to Apple's Macintosh. The machines -- which use a a 32-bit microprocessor and feature high quality graphics -- retail for under $600. They were recently shipped to stores around the country and have gotten initially good reviews from computer buffs.

However, there are widespread concerns about the financial viability of Atari because the home computer market has slumped badly and the growth for business personal computers has slowed considerably.

There also are questions whether Atari's computers fit into AT&T Information Systems' product scheme. The Atari computers have a unique software operating system and little software available from other companies at this time. On the other hand, Creative Strategies' Bajarin points out, Tramiel does "an excellent job" of being the low-cost supplier of computers and AT&T might be able to use its distribution muscle and software expertise to capture new business in the personal computer arena.