AMD battles back (and takes the eight-core lead)

At the beginning of last year, AMD was the CPU darling in terms of performance and the all-important price-performance ratio. This run of dominance ended with a thud in the summer of 2006 when Intel released its stunning new Core microprocessor architecture. Based on a highly efficient 65nm fabrication process -- a process AMD just reached at the end of 2006 -- this new architecture produced results that swiftly relegated AMD CPUs to also-ran status. Much to AMD's chagrin, benchmark result after benchmark result declared Core 2 processors the winners.

Interestingly, while AMD was left scrambling to keep up with Intel on the performance and performance-per-watt fronts for both desktop and laptop CPUs, the company experienced one of its best years ever. In January 2006, reports indicated that AMD CPUs were dominating market share on PC desktops to the tune of 85% to Intel's 15%. Even longtime Intel stalwart Dell Inc. got into the movement, inking a deal to use AMD CPUs in some Dell PCs.

But this success was largely fueled by price-performance advantages that existed prior to the release of the Core 2 Duo line. How will AMD respond in the coming year to what appears to be a clear technology advantage on Intel's part?

Part of the answer to this question appears to reside outside of the realm of CPUs. In July, AMD announced a whopper of an acquisition as it took over venerable graphics and chip set manufacturer ATI Technologies Inc. It's not likely that this acquisition will have a significant impact upon AMD's 2007 CPU forecast above and and distractions that a large acquisition can create.