The market shares of x86 microprocessors that Advanced Micro Devices has managed to achieve in the whole calendar 2006 and in Q4 are all-time records for the company. However, since AMD no longer has leading-edge performance crown and rival Intel Corp. is ramping up its award-winning Core 2 chips, it has to drop prices on its chips to stay competitive.

Intel Corp. controlled 74.4% of the x86 chip market in Q4 2006, AMD owned 25.3% of the market and the remaining 0.3% were shared between companies like Transmeta Corp. and Via Technologies, the preliminary figures from a study by Mercury Research reveal. For Sunnyvale, California-based chipmaker this is a 2% sequential gain and 3.9% annual increase in market share.

Even though the market share numbers for the whole calendar 2006 were not released, it is highly likely that the share of AMD’s in x86 chip shipments will be approximately 23%, which is much higher than around 18% in 2005 and 15.8% in 2004.

According to Mercury’s Q4 2006 figures released by AG Edwards’ analyst David Wong and published by MarketWatch web-site, in the desktop market, Intel had a 70.4% share, down from 72.4% in the prior quarter. AMD had 29.1%, up from 26.6%. In the laptop market, Intel had an 80.6% share, down from 83.2%, while AMD had 19.4%, up from 16.8% a quarter ago.

Nevertheless, in Q4 2006 Intel continued to regain market share in the server market. In the last quarter of 2006, Intel shipped 77.7% of central processing units for servers, up from 76.3% in Q3 and 74.1% in Q2. AMD’s share in Q4 slipped to 22.3%, down from 23.7% in the prior quarter.

Despite of market share gains in the desktop and mobile market as well as shipments increases across the board, due to necessity to decrease pricing on the chips and integrate ATI Technologies operations, AMD’s fourth quarter 2006 gross margin was 40%, excluding acquisition-related charges and stock-based compensation expense for the applicable periods, compared to 52% in the third quarter of 2006 and 57% in the fourth quarter of 20052. The decrease from the prior quarter was explained as “due largely to significantly lower server processor average selling prices (ASPs) and the inclusion of the former ATI operations”.