> Nintendo was about to release a next-generation console, the Famicom, in Japan. They wanted to export it to other markets, but didn’t want to do it alone. Nintendo really wanted to license the Famicom to Atari and have Atari distribute it in North America. Atari CEO Ray Kassar was going to sign the deal at CES in June, but delayed due to the spat over the Coleco Adam version of Donkey Kong. Then the deal fell through the cracks after Atari forced out Kassar as Atari CEO on July 7, 1983. Atari’s next CEO, James Morgan, never revisited it.

There's a leaked memo about this deal available here: https://web.archive.org/web/20080327135150/http://www.atarim... . Atari had already paid General Computer to design the 7800 when Nintendo reached out to them about distributing the Famicom. Atari viewed the 7800 hardware as likely being superior to the Famicom, so their strategy was to string out the negotiations for as long as possible until the two systems could be directly compared. The Coleco Adam dispute was probably just a convenient excuse to continue delaying.

When Ray Kassar was forced out due to insider trading (he sold a bunch of Atari stock around half an hour before Atari reported much lower than expected earnings), the business press was generally dismissive of the idea of introducing a new console into an already oversaturated market. The 7800 ended up getting delayed into 1984, then Jack Tramiel bought the company and didn't want to pay General Computer royalties on the consoles or software so they sat in a warehouse until 1986 when Atari finally paid up.

If Atari did end up going with the Famicom instead of the 7800, I imagine it would have ended up delayed and hamstrung the same way the 7800 was. If anything, maybe this would have left space for the Sega Master System to take over in the US.