Work on the VCS took place in Grass Valley, and in Los Gatos, California.
“I would bicycle to work and back marveling that I was getting paid to do this.”lxxxvi
“In March of 1976 I moved to Los Gatos CA to apprentice for Jay Miner, the lead chip designer.”lxxxv - Joe Decuir
There, Jay Miner and his team designed the guts of the Stella. This included the 6507 processor, TIA sound chip, cartridge slot and controllers. For most of the team, the project was thrilling.
- Joe Decuir
In the fall of 1976, Atari showed how serious they were about this new “programmable console”, so much so that they bought out the Grass Valley Think Tank ouright, and moved the entire development team to Atari’s new headquarters in Sunnyvale, California. They incorporated the team into Atari’s R&D staff, and Steve Mayer led the team.
We had to wait until we got to the 6502 or the 6800 series before there was even a possibility. Even then, they were too slow. We had to develop the Stella chip... which basically did all the screen refresh and other things that have to happen in real time, much faster than a microprocessor running at 300KHz could possibly do.” lxxxvii
- Nolan Bushnell
It was at this point that Nolan Bushnell pulled off one of the most brilliant moves of his already brilliant career. Since Atari had been beaten by their competition at their own game more than once, he decided to head them off at the pass. Instead of waiting for competitors to emerge after the Stella project was released, he decided to tie-up all available chip fabricators that could possible make a similar piece of silicon. It would not matter if someone tried to copy Atari -- because this time they would not be able to get any chips produced.
“I always played business as a game. What a lot of people don’t realize is that I tied-up every N-Channel manufacturer in the world, except for IBM, who had no interest in the game business. In those days when you built with slight modifications to tie them up. I wanted to have everybody working for me contractually. They did not necessarily know about one another.”lxxxviii
- Nolan Bushnell
However, these projects were very costly, to the tune of $100,000 each per year. To finish the Stella project, Atari needed an infusion of cash. They had finished fiscal 1975-1976 with $3.5 Million profit on $39 million in sales, but with growing competition, Bushnell did not think they would have enough money to finish the project.
“When you're a little company, and you hear that National Semiconductor is going to build a game and that Magnavox is going to build a game, then all of a sudden you say, I'm this little tiny ... do I have the resources?" You don't realize at that time that big companies tend to be really screwed up, so that they're sometimes really easier to beat than a good, well-tuned entrepreneurial operation.” lxxxix
- Nolan Bushnell
In the summer of 1976, Nolan Bushnell enlisted Donald Valentine again to help raise capital for the company. This time though, Valentine suggested Bushnell try to find someone to buy them out.
“What happened is a growing business consumes capital at prodigious rates. And Wall Street had a hard time distinguishing between the frivolity of our product and the fact that it was a serious business. Raising capital was very, very difficult for us. In order to go into the consumer marketplace, we just needed much deeper pockets, and that's why we decided to sell.”xc
- Nolan Bushnell
About the same time Manny Gerard was hired by Warner Communications to look for ways to expand the business. They wanted key acquisitions that would help the company move beyond its reliance on selling 7” singles, a product line that had been declining for a number of years. He heard about Atari being offered for sale, and was very interested.
While negotiations are being held, Bushnell tried to keep the true “laid-back” nature of the company away from the Warner executives who he as sure would frown upon Atari’s liberal attitude toward dress and drug use. One story says that right before a surprise visit from a Warner executive, Bushnell had all the assembly line employees hide inside game cabinets for 45 minutes, so as not be seen by the Warner visitors.xci
However, no insurmountable roadblocks appeared, and by November of 1976, Atari was sold for $28 million dollars, with Bushnell himself pocketing nearly $15 million, and Joe Keenan a sizeable sum as well. Warner was smart enough to see something special in Bushnell, and they kept him on as Chairman and CEO, while Joe Keenan acted as president. $100 million was pumped into Atari, and Stella was put into the forefront as the company's most important project.
In a matter of a few months, one of the greatest R&D and entertainment engineering companies of its day was suddenly matched with a one of the biggest entertainment marketing companies on earth. At the beginning, it seemed like a good marriage.
“...we had originally made a grocery list of 10 companies we would be willing to merge Atari with and Warner was not on that list. But through a connection, we made contact with Warner. We were really impressed with them, and I think they liked what they saw.”xcii - Gene Lipkin, Atari V.P. Of Marketing
The “creative” atmosphere that Bushnell fostered at Atari seemed like it would match well with a company that saw much of its revenue from the music business. If the two could find a way to stay in sync, they could prove to be an unstoppable force.