LEAD

Atari sneezed, and EA caught a cold

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Electronic Arts, founded by Trip Hawkins, in 1982, was the first software development firm to sell its products directly to consumers instead of partnering with companies that made personal computers. But the poor sound quality and graphics offered by that early generation of PCs were bigger problems than Hawkins liked to admit. And as the industry went through a painful shakeout, the retailers that sold computers -- and EA's computer games -- struggled.

Soon after Hawkins closed his second round of funding (this one for $3 million), in the spring of 1983, Atari, the company behind Pong and Asteroids, collapsed. EA didn't make games for Atari's system, but that didn't matter much. "We were just about ready to ship games, and our sales reps said, 'Who should we sell them to?" Hawkins recalls. "And I said, 'Look up video game retailers in the yellow pages.' And they came back and said, 'They're all either out of business now or have dropped the category because video games are dead."

Hawkins compares EA during those years with the plight of the Fremen, from the Frank Herbert sci-fi classic Dune. In order to survive in an arid climate, the Fremen wear special suits that recycle their saliva and sweat. "We had to be very frugal," he says.

PCs eventually improved, making it possible for EA to develop games with richer graphics and sound. In 1989, Hawkins took the company public, in an IPO timed to coincide with the launch of the Sega Genesis, the first successful 16-bit game system. EA's market cap soon hit $2 billion.

In 1991, Hawkins launched 3D0, another gaming company. But after a series of snafus involving Sony PlayStations, the company's bread and butter, 3D0 went bankrupt. Today, Hawkins runs Digital Chocolate, a company that makes games for mobile phones. He expects sales to stay strong -- and maybe even get a lift -- during this downturn, as more people stay home and play games rather than go out to see a movie. Having ridden the economy up and down, he knows that a company can be undone by forces beyond its control. But he also knows that you can find ways to get by. "Even though 3D0 was a failure, I'm not dead," he says. "I've gotten a lot of nicks and scratches, but I've learned a lot."

Last updated: May 1, 2008




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