The Atari Lynx was the world's first color handheld portable videogame system. Released in 1989, the Lynx offered multi-player functionality, 3D graphic capabilities, reversible controls, and a backlit color LCD screen. The Lynx features a strong library of games and technical abilities beyond that of its contemporaries. Unfortunately, the Lynx was ultimately unsuccessful due to Atari's inability to persuade developers to write enough high profile games for the system.
The Lynx was originally conceived by engineers at Epyx in 1987, where it was called the Handy. Dave Needle and R.J. Mical, two of the Handy's creators, were also members of the original Amiga design team. Epyx first showed the system to industry insiders at the Winter CES in January of 1989, and the audience was impressed. However, Epyx ran into financial problems and it became apparent that they would not be able to produce the Handy on their own. They needed to find a partner, and sent out invitations to several potential candidates. One of the invitees was Nintendo, who passed on the project. Another invitee was Atari, who was eager to reassert their market dominance of the early 80's. Atari and Epyx reached an agreement where Atari would handle the production and marketing of the system, and Epyx would handle the software development. Atari subsequently showed the system off to the press at the Summer 1989 CES with the working title Portable Color Entertainment System.
Source: AtariAge http://www.atariage.com/Lynx/history.html