AMD's processor prices remain under severe pressure: Caught between Intel's outgoing Pentium D series on the low end and the Core 2 Duo series on the high end, the X2 Athlons remain vulnerable to market shifts and Intel's supply strategy. Anyone intending to build a Vista PC on a budget should begin having a closer look at AMD.

AMD has seen better time in the past 18 months as it enters a rough period of competition with Intel while having to swallow the cost of the ATI acquisition. The most recent quarter result revealed heavy losses, mainly related to the acquisition itself. But dig deeper and it is obvious that margins are declining and AMD isn't quite earning as much per processor anymore as it did three, four quarters ago.

That trend apparently does not only apply to server CPUs, where system vendors will increasingly leverage the competitive landscape to negotiate better processor prices, but to the desktop as well. Intel recently reported that its average processor selling prices are increasing, while AMD said it has falling average selling prices. While both companies do not break out detailed financials for its desktop processor families, we have witnessed an ongoing trend in which Intel apparently leverages its Pentium D series to drag down mainstream desktop processor prices, which has a direct, negative impact on AMD. The higher end Core 2 Duo series shows little impact and relatively stable pricing.

AMD has very little to defend itself against this move; more competitive processors, including the "Agena" quad- and "Kuma" dual-cores as well as the 5800+ and 6000+ Athlon X2 processors are not expected to arrive until late Q2 or early Q3 of this year. The company confirmed that it continues to expect stiff competition from Intel for another two quarters, which indicates a continuing trend of falling processor prices. A comparison of current AMD tray prices with our current list of average retail prices provides an indication of the pressure on AMD prices: Four of eleven CPUs (FX-62, 4600+, 4200+, 3800+) have average retail selling prices that are below AMD's 1000-unit tray price. Keep in mind that we are not able to break out 90 nm and 65 nm versions in this list.

Intel, as comparison has also two processor that currently sell below the tray price (X6800, E6700), but they are on the very high end where company has substantial wiggle room. If Intel keeps its pressure on AMD, there is a good chance that the Athlon X2 may become a deal you can't turn down, if you are looking to build a Vista PC on a budget.