But in the overall PC market, AMD will need to go further to regain its footing. In particular, it will need to release more and better products for notebooks, the fastest growing segment where Intel has executed "nearly flawlessly" in terms of feature set and price, Kleynhans said.

AMD also will need to lay down a road map for competing with Intel's Atom processor, which is quickly gaining traction in the fast-growing market for "netbooks," sub-$500 notebooks with screens of 10 inches or less. Atom also positions Intel as a chip supplier for manufacturers of other ultra-mobile PCs now and in the future.

"Atom in a lot of ways is the right product at the right time," said John Spooner, an analyst for Technology Business Research. "AMD really needs to have a clear answer to the Atom."

AMD also needs to reverse buyers' perception of the company as a low-cost provider of chips by aggressively marketing its technology advancements as worth paying more for. "Right now, people still look at AMD as a low-price version of Intel," Spooner said. AMD has the opportunity to change that perception starting in the second half of next year, when the company plans to release its Fusion Architecture, which combines the CPU and graphics processor on the same piece of silicon, or die. AMD call its upcoming chip an "accelerated processing unit."

AMD's graphics division ATI is a bright spot in the company. The company's add-on graphics cards used in high-end PCs for gaming, video editing, and other graphics-intensive chores have put rival Nvidia on the defense after a couple of years of the latter company gaining market share, Kleynhans said. "AMD has turned the tables on them."

Nevertheless, Intel's Core i7 architecture, code-named Nehalem, will be the platform to beat for AMD. While the first chips, which will be for PC desktops, won't be formally released until next week, they have already received strong praise from "first-look" reviewers. Core i7 server processors are due in the first half of 2009.

"It's certainly the product to beat in the market, and computer manufacturers will see that as well," Kleynhans said.

AMD plans to meet the challenge with Istanbul, a six-core processor compatible with the chipset and motherboard socket for Shanghai. A key difference between the two chips, besides the number of cores, will be Istanbul's new DDR2 integrated memory controller. Shanghai's IMC is a refresh of the previous generation.

In mid-2009, AMD plans to ship its first chipset in five years. Code-named Fiorano, the chipset, which includes ATI graphics technology, will support Shanghai and Istanbul. In 2010, AMD plans to ship a new platform, code-named Maranello, that will require a new socket to support enhancements such as the move to DDR3 memory from DDR2. For the new platform, AMD will release in 2010 a 12-core processor code-named Magny-Cours, and a six-core chip code-named Sao Paolo.