As someone who was there as well, and has actually taken the time to research market figures and reports, I can say hogwash. The c64 had very little impact on the 2600, what it had an impact on was Atari's 8-bit computer line. Two completely different markets. Likewise the 2600 was never killed, Atari Inc. and Atari Corp. continued to have and rely on strong 2600 sales. In fact when Atari Corp. found the magic price point of $50 in the Christmas season of '85 (the same time the NES was being test marketed) it came to dominate the low end console market during the NES/7800/SMS's lifetime. And likewise, none of the consoles had "floppy drives". A few had simplistic keyboard/computer "expansions" if you could call it that. Coleco's Adam was a standalone computer that was also sold in a CV "attachment" model that simply used the CV for it's A/V out As for the Intellivision never really catching on, sales during it's lifetime would say otherwise. It was the number 2 player behind Atari.
Atari's issue was simply it's dual management with Warner. Warner management often superseded Atari's own management, and made decisions to ignore warehouses full of stock and the overcrowded console market and 3rd party games market to falsely create higher stock earnings for itself. It was a bubble that burst. This first signs of what had been going on appeared to the public in early December of '82, foreshadowing the market wide crash that was to come when most of the video game industry also suffered big market value dips after Atari's announcement Interestingly, it was a problem Morgan could have rectified with NATCO if given a chance.