Commodore's board of directors were as impacted as anyone else by the price spiral and decided they wanted out. An internal power struggle resulted; in January 1984, Tramiel resigned. He founded a new company, Tramel Technology (spelled differently so people would pronounce it correctly), and hired away a number of Commodore engineers to begin work on a next-generation computer design.

Now it was left to the remaining Commodore management to salvage the company's fortunes and plan for the future. It did so by buying a small startup company called Amiga Corporation in August 1984, for $25 million ($12.8 million in cash & 550,000 in common shares) which became a subsidiary of Commodore, called Commodore-Amiga, Inc. Commodore brought this new 16-bit computer design (initially codenamed "Lorraine", later dubbed the Amiga 1000) to market in the fall of 1985 for US $1295.

But Tramiel had beaten Commodore to the punch. His design was 95% completed by June (which fueled speculation that his engineers had taken technology with them from Commodore). In July 1984 he bought the consumer side of Atari Inc. from Warner Communications which allowed him to strike back and release the Atari ST earlier in 1985 for about $800.

During development in 1983, Amiga had exhausted venture capital and was desperate for more financing. Jay Miner and company had approached former employer Atari, and the "Warner owned" Atari had paid Amiga to continue development work. In return Atari was to get one-year exclusive use of the design as a video game console. After one year Atari would have the right to add a keyboard and market the complete Amiga computer. The Atari Museum has acquired the Atari-Amiga contract and Atari engineering logs revealing that the Atari Amiga was originally designated as the 1850XLD. As Atari was heavily involved with Disney at the time, it was later code-named "Mickey", and the 256K memory expansion board was codenamed "Minnie".

The following year, Tramiel discovered that Warner Communications wanted to sell Atari, which was rumored to be losing about $10,000 a day. Interested in Atari's overseas manufacturing and worldwide distribution network for his new computer, he approached Atari and entered negotiations. After several on-again/off-again talks with Atari in May and June 1984, Tramiel had secured his funding and bought Atari's Consumer Division (which included the console and home computer departments) in July.

As more execs and researchers left Commodore to join up with Tramiel's new company Atari Corp. after the announcement, Commodore followed by filing lawsuits against four former engineers for theft of trade secrets in late July. This was intended, in effect, to bar Tramiel from releasing his new computer.

One of Tramiel's first acts after forming Atari Corp. was to fire most of Atari's remaining staff, and to cancel almost all ongoing projects, in order to review their continued viability. In late July/early August, Tramiel representatives discovered the original Amiga contract from the previous fall. Seeing a chance to gain some leverage, Tramiel immediately used the contract to counter-sue Commodore through its new subsidiary, Amiga, on August 13.

The Amiga crew, still suffering serious financial problems, had sought more monetary support from investors that entire spring. At around the same time that Tramiel was in negotiations with Atari, Amiga entered into discussions with Commodore. The discussions ultimately led to Commodore's intentions to purchase Amiga outright, which would (from Commodore's viewpoint) cancel any outstanding contracts - including Atari Inc.'s. This "interpretation" is what Tramiel used to counter-sue, and sought damages and an injunction to bar Amiga (and effectively Commodore) from producing any resembling technology. This was an attempt to render Commodore's new acquisition (and the source for its next generation of computers) useless. The resulting court case lasted for several years, with both companies releasing their respective products. By March 1987 they had settled out of court, with all suits against Tramiel's engineers dropped. His "Business is War" tactics had succeeded again.
Amiga 500 (1987)

Throughout the life of the ST and Amiga platforms, a ferocious Atari-Commodore rivalry raged. While this rivalry was in many ways a holdover from the days when the Commodore 64 had first challenged the Atari 800 (among others) in a series of scathing television commercials, the events leading to the launch of the ST and Amiga only served to further alienate fans of each computer, who fought vitriolic holy wars on the question of which platform was superior. This was reflected in sales numbers for the two platforms until the release of the Amiga 500 in 1987 which led the Amiga sales to exceed the ST by about 1.5 to 1, despite reaching the market later. However, the battle was vain as neither platform captured a significant share of the world computer market and only the Apple Macintosh would survive the industry-wide shift to Microsoft Windows running on PC clones.