AMD's historic problem of not meeting demand fast enough has forced the company towards a dangerous strategy in a desperate attempt to improve yields on its popular K6 processor. The company's ebullient CEO, Jerry Sanders warned Wall Street analysts last week that the move (see PC Week 13 January, page 2) from a 0.35 micron process to a 0.25 micron process is a "high-risk" strategy. After posting a loss of $12.3 million (#7.6 million) for the latest quarter, Sanders warned analysts that the company needs to move production of its K6 processor to its Texas megafab, Fab 25, which although specifically designed to manufacture 0.25 micron technology, has never been proven to do so effectively. Currently all K6s are made on a .35 micron process in California, which is the company's development site and will not be able to meet demand for the chip now that AMD has garnered Compaq and IBM as customers. "Moving to Fab 25 and a 0.25 process is extremely important to us," commented Richard Baker, AMD marketing manager. "Moving to Fab 25 will almost triple our K6 production and is an obvious way of dealing with our supply and demand issue." But Joe D'elia, senior analyst at Dataquest warned that AMD is on thin ice if things go wrong. "(AMD) has been working with K6 in Sunnyvale but there's no assurance that the process will work at Fab 25 - it's not unknown for the recipe to be lost on the way to another production site." AMD's loss for the fourth quarter ended 28 December was not as large as some Wall Street analysts had anticipated. AMD's sales for the quarter were $613.17 million (#376.17 million), an increase of 3% over the last quarter and 23% compared with the same quarter last year. In the same week as AMD was working out its strategy, Intel was fleshing out its own plans for the forthcoming Katmai chip (see box), details of which were exclusively revealed last December by PC Week.
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