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Despite a recent financial setback, Advanced Micro Devices gained on Intel in the x86 space in the fourth quarter, according to a new analysis by Mercury Research released Jan 31.

By the end of the fourth quarter of 2006, AMD held 25.5 percent of the x86 market, an increase of more than 8 percent compared to the third quarter, when it held 23.3 percent, according to Mercury, based in Cave Creek, Ariz.

Intel, by comparison, lost some of its overall market share to AMD. The Santa Clara, Calif., chip maker’s market share was 74.4 percent in the fourth quarter, a decrease of about 2 percent compared to a third-quarter market share of 76 percent, according to Mercury.

Compared to a year ago, Intel accounted for 77 percent of the x86 market, while AMD, which is based in Sunnyvale, Calif., held 21.4 percent of the market. For the year, the total x86 market accounted for about $29.5 billion in sales, said Dean McCarron, an analyst at Mercury.

While the numbers showed an improvement for AMD across the entire market, McCarron said that Intel did gain some market share back in the server space. For AMD, the company saw its greatest gain in notebooks and desktops.

Click here to read more about AMD’s new plans for embedded chips.

“I can say qualitatively that Intel gained server share (a bit more than one point) and AMD gained share in desktops and notebooks (each a bit more than two points),” McCarron wrote in an e-mail to eWEEK. He said he could not provide the specific numbers, however.

McCarron concedes that AMD’s share of the market is the highest in the history of the company, but that market share has come at the expense of gross margins. When the company released its quarterly results on Jan. 23, AMD announced that its gross margins dipped to 40 percent compared to 57 percent a year ago.

The company also announced that its server chip sales were flat compared to the third quarter of 2006. However, the Mercury report reinforces AMD’s gains in the desktop and especially the notebook market. Executives said mobile chip shipments were up 76 percent.

For Intel, the news that it gained in the server space, which had been lacking since AMD introduced the Opteron chip in 2003, was tempered by the fact that its overall market share for a quarter had not been this low since 1995.

Although Intel has lost share to AMD, it has managed to bounce back in recent months with its dual-core server processor, called Woodcrest, as well as its quad-core processor, called Clovertown.

Click here to read more about Intel’s quad-core announcement at CES.

Intel also managed to counter the partnership formed by AMD and Dell by announcing on Jan. 22 that it had a new agreement to sell x86 processors to Sun Microsystems.

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