Despite the better-than-expected quarter, AMD executives warned that the first quarter will present a crunch for the company as it shifts away from its ".35" manufacturing process to the ".25" manufacturing process.
As during previous quarters, the source of AMD's losses continues to be yield, or the number of usable chips manufactured per silicon wafer. Although yield improved during the fourth quarter, work remains to be done in order to turn a profit, said Jerry Sanders, AMD chairman.
"It's a stubborn problem and we haven't seen the kind of progress we'd like," Sanders told analysts during a conference call. "We believe we understand the issues?but it is a question of blocking and tackling."
Ashok Kumar, an analyst with Loewenbaum & Co., stated in a report prior to the release of AMD's earnings report that the company's overall yields for the K6 are around 45 percent, or 60 good chips out of a possible 130 on a 0.35 micron process wafer, whereas a mature process should yield at 70 percent, or 90 good die per wafer. Yields on the 233-MHz K6 on the 0.35 micron line are lower than the overall average, Kumar said.
AMD's net loss for the quarter came to $12.3 million, or 9 cents a share, compared with a net loss of $21.2 million, or 15 cents a share, a year ago. Analysts were expecting a significantly larger loss of 14 cents a share, according to First Call.
Net sales for the fourth quarter grew to $613 million, an increase over the $497 million reported for the same quarter the year before.
AMD reported a net loss of 21.1 million for the year, an improvement over losses of $69 million in 1996. Net sales for 1997 totaled to $2.4 billion--up from nearly $2 billion a year ago.
Although Sanders and other AMD executives declined to predict what might happen to yields in the current quarter, the AMD team emphasized that the shift to the .25 micron process will present challenges for the company.
Because the .35 chips and .25 chips are being manufactured in the same plant, different generations of K6 chips will be competing with one another for space, said Sanders. If a shortfall occurs, AMD could once again find itself short on chips.
"The first quarter will be our toughest quarter for that reason," Sanders said.
AMD already has started to produce a small number of chips on the new process, company executives said.
Meanwhile, net revenue for the quarter attributable to K6 processors came to $203 million.