Atari built a series of 8-bit home computers based on the MOS Technology 6502 CPU, starting in 1979. Over the next decade several versions of the same basic design would be released, but the models remained largely identical internally. They were the first home computers designed with customized coprocessor chips. IBM even considered licensing Atari for their own personal computer, but decided to build their own. But design flaws, internal corporate turmoil and difficult, fast-changing market conditions contributed to their eventual demise.
As soon as the Atari 2600 was released the engineering team, calling themselves Cyan, started work on its eventual replacement. They felt that the 2600 would have about a three year lifespan, and tried to limit themselves to those features that could be perfected by that time. What they ended up with was essentially a "corrected" version of the 2600, fixing its more obvious flaws.
The newer design would be faster than the 2600, have better graphics, and include much better sound hardware. Work on the chips for the new system continued throughout 1978, primarily focusing on the much-improved video hardware known as the CTIA (the 2600 used a chip known as the TIA).
However, at this point, the home computer revolution took off in the form of the Apple II family, Commodore PET and TRS-80. Ray Kassar, the new CEO of Atari, wanted the new chips to be used in a home computer to challenge Apple. Atari researched on what would be needed to produce a workable home computer of their own. This included support for character graphics (something the 2600 didn't support), some form of expansion for peripherals, the BASIC programming language, and a keyboard.
