Intel Corp (INTC)

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Re: "It looks to us like Intel and AMD are lining up for a nasty fill-the-factories fight in 2006," Osha said. "We think that it will be difficult for AMD to show processor margins during 2006 that are better than those achieved in 2005, and in fact it's possible that processor margins deteriorate as a result of Intel's efforts."

I think Osha is hitting a critical "nail on the head" here. Intel will have 4 65nm fabs, compared to their 3 90nm fabs today. Moreover, the shift to 65nm enables 90nm capacity to shift to chipsets and relieve some of the pressure they have right now in providing adequate volume to the market. AMD has to fill their Fab36 to offset the huge costs going into it, but Intel will have to respond with lower prices and more competitive product lines. We haven't seen the battle start to form, yet, because Intel has been capacity constrained this year. This will not happen next year. With more capacity and more competitive products, I think Intel will be winning back a lot of market share, and AMD's exposure to lower margins and future losses becomes inevitable.