Cray decided to spin off the Colorado Springs laboratory to form Cray Computer Corporation, taking the Cray-3 project with them.
The 500 MHz Cray-3 proved to be Cray's second major failure. In order to provide the tenfold increase in performance that he always demanded of his newest machines, Cray decided that the machine would have to be built using gallium arsenide semiconductors. In the past Cray had always avoided using anything even near the state of the art, preferring to use well-known solutions and designing a fast machine based on them. In this case, Cray was developing every part of the machine, even the chips inside it.
Nevertheless the team was able to get the machine working and installed their first example at NCAR. The machine was still essentially a prototype, and the company was using the installation to debug the design. By this time a number of massively parallel machines were coming into the market at price/performance points the Cray-3 could not touch. Cray responded through "brute force", starting design of the Cray-4 which would run at 1 GHz and outpower these machines, regardless of price.
In 1995 there had been no further sales of the Cray-3, and the ending of the Cold War made it unlikely anyone would buy enough Cray-4s to offer a return on the development funds. The company ran out of money and filed for Chapter 11 bankruptcy March 24, 1995.
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