Nolan Bushnell and Ted Dabney initially formed Atari in 1972 to produce coin-operated arcade machines. Atari was instrumental in the creation of the video arcade, and for the formation of the USA video game industry.

Atari developed the massively popular Atari VCS in 1977 but needed additional funding to get it to market, so Bushnell sold Atari to Warner Communications in 1976. In 1978 Bushnell left Atari and Warner appointed Ray Kasser as CEO.

The Warner era Atari was initially very successful and grew rapidly until 1982, getting into the home computer market with the 400 and 800 computers in 1979. Management hubris and bad corporate decision making caused Atari to produce low quality software titles, lose their top developers, over-produce products, create the unsuccessful 5200 console and 1200XL home computer, and lose money every quarter during 1983. The shockwaves from all of this caused the 1983 video game crash, which decimated the USA video game industry. In 1984 Warner sold off the consumer games division to Jack Tramiel, and in 1985 the coin op division to Namco.

Under Tramiel, Atari initially focussed on home computers, price-cutting the recently released 8-bit 600 and 800XL and producing (in 1985) the cost-reduced XE series computers, both of which sold better in Europe than the USA.

Atari re-entered the console market in 1986 with the 2600jr and the 7800, followed by the XEGS in 1987, before finally discontinuing their 8-bit products in 1992. The 16-bit era produced the ST series home computers (1985), the Lynx (1989) and the Jaguar (1993) before Atari finally stopped producing hardware in 1996.