Several proposed operating systems were considered including VisiCorps Visi On and Atari's internal OS code-named "Snowcap".

A second project, Atari Gaza, ran in parallel, designing an upscale workstation machine running either BSD Unix or CP/M-68k.

Atari management concluded they had no way to sell into the business market, redirecting Gaza engineers to a new low-cost machine based on the Amiga chipset, "Mickey".

Only the synthesizer caught the interest of Tramel Technology lead engineer Shiraz Shivji and the rest of the projects disappeared.

Atari's earlier consoles and computers generally used an off-the-shelf 8-bit central processor with custom chips to improve performance and capabilities.

Offloading these duties to the custom chips allowed the CPU in Atari's design to spend less time on housekeeping chores.

This led to both a quirky design as well as surprising programming flexibility; it was some time before programmers learned the knack of "racing the beam", but when they did, 2600 games began to rapidly improve compared to early efforts.

The C/GTIA was a graphics chip, greatly updated compared to the TIA, sound was moved to the new POKEY which provided four-channel sound as well as handing some basic input/output tasks like keyboard handling, and finally, the software-based display system used in the 2600 was implemented in hardware in the ANTIC, which was responsible for handling background graphics (bitmaps) and character-based output.

This separation of duties allowed each sub-system to be more powerful than the all-in-one TIA, while their updated design also greatly reduced programming complexity compared to the 2600.

Notable among these were the Intel 8088 and Zilog Z8000, designs using 16-bit internals, which initially became available as daughtercards on S-100 bus machines and other platforms as early as the late 1970s.

[5] Atari's Sunnyvale Research Lab (SRL),[b] run by Alan Kay and Kristina Hooper Woolsey, was tasked with keeping the company on the leading edge, exploring projects beyond the next fiscal year.

One might, for instance, make a rectangle that was larger than the screen, which would allow it to be scrolled simply by updating the origin point in its description block.

Small rectangles could be used for movable objects whereas earlier Atari designs used custom sprite hardware for this task.

Alkire borrowed Palevich's new Mac computer, using it to make block diagrams of a machine that slowly emerged as the Sierra effort.

[18] Each engineer in SRL had their own favorite new CPU design, and the preferred selection changed constantly as work on Rainbow continued.

[24] With Rainbow largely complete by this time, at the point of tape out, some effort was put into saving the design by licensing it to a 3rd party.

[25] HP Labs hired a group of thirty engineers from SRL, including Alkire and Saunders, and the Rainbow effort ended.

[26] Sierra proceeded alongside similar projects within Atari being run by other divisions, including an upscale m68k machine known as Gaza.

The business computing market appeared to be immune to the price war and the IBM PC was finally starting to sell in quantity despite being much less sophisticated than Sierra or Gaza.

[31] Lorraine was also based on the 68000 and generally similar to Sierra and Gaza in almost every design note, which is not surprising given that the teams originally came from the same company.

Using line-end interrupts, programs could modify these pointers on-the-fly as the screen was drawn, allowing the system to display different objects on each line.