AMD rise means Intel margin pressure here to stay

Here's a grim message for investors worried about Intel Corp.'s admission that its gross margins won't improve this year: Get used to it.

Analysts say the gloomy gross margin forecast is one of the clearest signs yet that Advanced Micro Devices Inc. is gradually prying loose Intel's grip on the microprocessor industry.

Intel, which makes processors for three-quarters of the world's personal computers, said on Tuesday gross margins would be 50 percent in 2007, below the 51.5 percent last year, when its chips suffered a beating at the hands of AMD offerings. That didn't sit well with investors, who sent Intel shares down 5.7 percent to $21.04 on Nasdaq on Wednesday.

"When you go from a fairly monopolistic situation to one where you have two real, viable, strong competitors, you're going to immediately degrade the gross margin potential of that monopolist player," said Stifel Nicolaus analyst Cody Acree.