It has been a long, hot summer for AMD. Its long time rival Intel has continuously slashed prices on competing products, and within the last month has unleashed the best weapon in its arsenal, unveiling a new processor architecture which AMD has yet to respond to. Today it will release another blow, the Conroe desktop chip.

Intel's hails the new micro-architecture behind the Conroe, dubbed Core, as a technical marvel, promising to drive a new era of computing. Last month AMD realized its potential.

The Woodcrest, Intel's flagship server processor based on the same technology as Conroe, was released June 26th to rave reviews for efficiency - or performance per watt - the previous stronghold of AMD's Opteron processor.

AMD has seen healthy gains in its server market share even as it enters into Intel's space, capturing over 22 percent. Following the Woodcrest release, Eric Gomberg for Thomas Weisel Equity Research noted Intel clearly appears to be in a strong, if not leadership, position, with respect to server CPU's.

It is the Conroe that will cause more damage to AMD in the immediate term, however. Server chips take time to be adopted by large enterprises, and Dean McCaron of Mercury Research believes that Intel probably won't see any immediate impact for several quarters.

Desktop processors are different. When the product is released, they are immediately available on shelves and consumers upgrade in droves.

To make matters worse, AMD does not have a readily available solution to counter. Its new line of processors are not expected for months, and experts explain that even then, the offerings will only be product refreshes, not a whole new micro-architecture matching Intel.

On top of this, Intel has been lowering prices on its existing Pentium lines to make room for the new Conroe. AMD has been forced to react, dropping its popular Athlon-64 nearly 47% this Tuesday, but upon arrival of Conroe, Intel can again start charging premiums.

Intel wants to make room for its new part, McCaron explains. When you are there first you get to enjoy the benefits of higher pricing.

AMD has made several strategic moves to absorb the blows, and hit to back harder in the future. This Monday the company bought ATI Technologies, a firm specializing in graphics hardware, for $5.4 billion

The Sunnyvale Calif.-based firm hopes to leverage the technology to fight Intel on all fronts.

In the past it could only compete on the processor front while Intel could offer a more robust solution with chipsets and integrated graphics, Jon Peddie, president of industry watchdog, Jon Peddie Research explains. Now it can offer all that.

Mark Lipacis of Prudential Securities says that in from a strategic standpoint we like the strategy and the vision, however, seeing no immediate benefits, he lowers AMD to neutral weight from overweight, and our price target from $40 to $25.

They are looking at product that wont be introduced till [2008] to [2009], MaCaron states. But we wont see how it relates to the comp at least for probably at least a couple of years.

Until then, the Conroe holds the spotlight as the only desktop CPU commanding premiums. With Intel currently holding 85 percent of the CPU market for personal computers, Conroe may just take Intel even higher at the expense of AMD.