The crash was such a huge loss. This thing in 1984 was an evolutionary but very nice update to the 5200. Seriously, look at Asteroids on the 5200 (prototype, but very similar to the 400/800) and 7800, which looked low-key gorgeous on a CRT.
By 1986, Nintendo was the bold savior of the console market, and even then there’s an alternate universe where Atari completely abandons the 7800 and XEGS to re-brand the NES or, later, the Sega MD/Genesis.