(FORTUNE Magazine) – THE AMIGA personal computer, introduced by Commodore International last July, wowed technology buffs and even raised hopes among the company's beleaguered shareholders. Wall Street analysts quickly dubbed it ''the save-the-company machine.'' As one analyst put the matter, ''If the Amiga doesn't make it, Commodore is finished.'' Amiga isn't making it, at least not yet, but Commodore is still alive. How come? The brief answer is that the home computer market, Commodore's traditional territory, is -- like the company -- sick but not dead. Commodore's troubles began a year ago when consumers began passing up its cheap and simple machines for more sophisticated personal computers. But Commodore has been squeaking along by continuing to sell respectable numbers of its $150 Commodore 64 in the U.S., Europe, and Latin America. Moreover, the company has a souped-up version of the 64, the $300 Commodore 128, that some market researchers and security analysts believe could be a winner this Christmas. Because of problems producing the Amiga, Commodore was so late getting the new machine to the market that it missed much of the crucial holiday selling season. About 40% of home and personal computers are sold during the fourth quarter. Commodore didn't get its new offering to most dealers until mid- November. The company has already chopped sales projections for the current quarter in half, to only 50,000 of the machines. But if Commodore can sell upwards of 400,000 of the 128s before the end of 1985, it may be able to generate enough cash to scrape through the lean months after the holidays, when computer sales to consumers usually fall off. Says Thomas J. Rattigan, 48, president and chief operating officer of Commodore, ''If we can take full advantage of both the 64 and the 128 worldwide, we've got a lot of running room.'' Not that much running room. Commodore's revenues are down, losses have mounted over the past three quarters to a total of $184 million, and the company is not in compliance with the terms of some $178 million in bank loans. Cash flow has dried to a trickle. Neither Rattigan nor Vice Chairman and Chief Executive Marshall F. Smith, 56, denies that Commodore will be in the soup if the Amiga fails. If it does, they say, the company will have to be ''reconfigured.'' Finishing each other's sentences like two vaudevillians who have done this routine before, they elaborate: ''It will have to be reconfigured by two other guys,'' says Smith, because, concludes Rattigan, ''the two guys here will have committed hara-kiri.'' For all their black humor, the two men are operating on the assumption that Commodore is a company with a future. That's something it might not have had under Jack Tramiel, the founder and chief executive who left the company in January 1984 after a dispute with Irving Gould, 66, Commodore's chairman and majority shareholder. Under Tramiel's leadership, Commodore was an entrepreneurial, low-cost manufacturer that knocked competitors to their knees by viciously slashing prices. But it was also a one-product company whose management gave little thought to planning for the future. When the home computer market collapsed, Commodore had nothing else to fall back on. Mattel and Coleco got out of the business, as did Warner Communications, then the owner of Atari. Warner sold Atari to the newly unemployed Tramiel for a pittance. A stream of Commodore executives followed him to Atari. Gould recruited Smith, Tramiel's successor, from Thyssen-Bornemisza NV, a big conglomerate based in the Netherlands Antilles, and Smith promptly fired others. The new chief executive repopulated Commodore with professionals and managers from well-known outfits -- Apple, Nabisco Brands, and the Yankee Group, a Boston market research firm. Rattigan formerly worked for PepsiCo -- the red-suspendered Harvard MBA made a name for himself there as a trouble- shooter by cleaning up an accounting scandal in the company's international operations. SMITH, RATTIGAN, and their colleagues will keep Commodore in the home computer business as long as they can, but they know they can't build Commodore's future on it. To move with the market into personal computers, in October 1984 Commodore bought tiny Amiga Corp. for $27 million in cash and stock. Amiga had under development a computer ''so phenomenal, so far ahead of everyone else'' -- as David S. Morse, one of the little company's founders, put it -- ''that the world would have to pay attention.'' This machine became Commodore's Amiga. Technologically, it's a dazzler. The heart of the Amiga consists of a Motorola 68000 microprocessor, the same chip that powers the Apple Macintosh. In Commodore's computer, though, the 68000 is augmented by a set of three custom-designed chips, one each to handle stereo sound, graphics, and animation. Thanks to the special chip set, the Amiga performs like a virtuoso, simulating the sounds of musical instruments, assembling fancy graphics on its color monitor, and even animating them like cartoons. The Amiga can do several different computing jobs, such as word processing and financial calculations, at once, a feat known as multi-tasking. And because the triple-chip set relieves the central microprocessor of powering sound and graphics, the Amiga is faster than competing models. Priced at $1,295 for the basic machine with 256K of memory, plus $495 for a color monitor, the Amiga represents a lot of computing power for the money. Commodore may have room to cut the price if that's what it takes to stimulate sales; one technology company that has taken an Amiga apart estimates its cost to Commodore at $350. Raves Douglas Cayne of the Gartner Group, a market research firm, ''The Amiga is absolutely the most spectacular, most wonderful, most powerful machine for the home market today.'' Cayne and other admirers wonder, though, if Commodore hasn't blown the marketing of the Amiga. Initial sales of the few machines that have made it to the stores have been encouraging, but sales may well slow as soon as what California dealers call the ''byte heads'' -- technical enthusiasts who have to be first on their block to own the most advanced equipment -- all have Amigas. Other customers are unlikely to buy until they're sure of a large library of software, and software for the Amiga has been agonizingly slow in coming. In early December, Commodore had only about 40 programs available, most for games or graphics. Without software for a wider range of applications, consumers are likely to take the attitude of one man in a New Jersey department store who looked at the Amiga and remarked to his wife, ''Buy a $1,500 computer for junior to play on? Sure.'' They strolled away. Commodore hopes that a new piece of software called the PC Emulator will help sales. The Amiga runs on an operating system named AmigaDOS, and is not compatible with the IBM PC. In ads, Commodore has been promising that the PC Emulator, which is supposed to be shipped to dealers any day now, will enable the Amiga to run most software programs written for the IBM machine. What the ads don't say is that the Amiga will run them much more slowly than the IBM PC. That's not so important to someone doing word processing, but could be ( annoying to number crunchers. Commodore's critics believe that buyers who want IBM compatibility -- people who have an IBM PC at the office, for example -- will pass up the Amiga for another machine. They also believe that Commodore may have tripped itself up by positioning the Amiga as Everyman's -- and Everykid's -- computer. Commodore has been pitching its product as both a home and business computer. This marketing approach has already turned off some dealers, among them BusinessLand, a large San Jose-based computer-retailing chain that has decided not to carry the Amiga. THE PEOPLE most interested in whether Amiga will sell, other than Commodore executives and shareholders, are probably the company's bankers. Rattigan says Commodore has begun paying down debt recently. Even so, the banks can still call Commodore's loans. They have given Commodore an extension on its loan agreements until January 31 and may extend the deadline and cooperate in restructuring Commodore's debt if the Amiga does all right. If it doesn't, the banks may well force Commodore into bankruptcy. Says Harvey C. Allison, a security analyst with the brokerage firm Wertheim & Co., ''The banks must be satisfied the Amiga can succeed if they are to keep their hands off Commodore's assets.'' The possibility of bankruptcy can only be torture for Chairman Gould, who has seen the value of his investment in the company decline from $331 million in 1983 to $65 million recently. Rumors abound that Gould wants to sell the company, or at least his stake. In any reorganization, his stake in the company and those of other shareholders would be subordinate to the claims of the banks. Former Commodore executives say Gould tried to unload his interest in Commodore at least once before -- in early 1984, after Tramiel left the company. He reportedly discussed a deal with RCA Chairman Thornton Bradshaw, but couldn't get his price. Gould admits talking to RCA, but denies he tried to sell anything. Since then, Commodore has hired the investment banking firm of Salomon Brothers, possibly to put together a similar deal with someone else. The investment bankers are unlikely to find a buyer. Smith says the companies that have been eyeing Commodore want only one thing, and that's the Amiga chip set. Commodore executives say they're talking with several manufacturers interested in buying a license to use the Amiga set or individual chips in their own computers, which wouldn't compete with Amiga. If Commodore does sign up licensees, it hopes to manufacture the chips for them at its own plants. ''Semiconductor manufacturing will be a cornerstone of this company in the future,'' Smith says. If there is a future beyond January 31, that is.

CHART: INVESTOR'S SNAPSHOT COMMODORE SALES (LATEST FOUR QUARTERS) $798.1 MILLION CHANGE FROM YEAR EARLIER DOWN 39% NET PROFIT $180.8 MILLION CHANGE PROFIT YEAR EARLIER RETURN ON COMMON STOCKHOLDERS' EQUITY -96% FIVE-YEAR AVERAGE 25% RECENT SHARE PRICE $10.75 PRICE/EARNINGS MULTIPLE N.A. TOTAL RETURN TO INVESTORS (12 MONTHS TO 12/6) -50% PRINCIPAL MARKET NYSE Explanatory notes: page 123