Intel Answers Back in Chip War

The company rolls out its Core 2 Duo processor.
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Mustering all its industry clout and firepower,

Intel

(INTC) - Get Report

officially released its most significant microprocessor in years Thursday.

Speaking to press and analysts at Intel's Santa Clara, Calif. headquarters, CEO Paul Otelini extolled the virtues of its new Core 2 Duo chip, which the company hopes will reverse a period during which its supremacy in the personal computer market has eroded.

"The Core 2 Duo processors are simply the best processors in the world," said Otelini, contending that the new chip signaled the most significant reinvention of the personal computer since Intel introduced the Pentium processor in 1993.

For Intel, whose shares have traded at three-year lows recently, the new microprocessors are one part of a broader plan to turn the company around. Intel is also in the midst of an internal reorganization to cut costs and shift the company's focus almost entirely on the PC market.

Intel said there are already more than 550 system designs under way -- the most in Intel's history -- featuring the new Core 2 Duo processor, which consists of 10 different versions of the chip with varying specifications.

The usual cadre of top-tier PC makers, including

Hewlett-Packard

(HPQ) - Get Report

,

Dell

(DELL) - Get Report

and

Gateway

(GTW)

, distributed simultaneous press releases touting new machines based on the processor. Desktops based on the processors are expected to be available in early August, while notebooks, which have experienced sales growth rates well above desktops PCs in recent months, will be available at the end of August, according to Intel.

One conspicuous absence among the PC makers joining the Core 2 Duo's coming-out party was

Lenovo

, the world's No.3 PC company and maker of the popular ThinkPad. The Chinese company has recently announced low-end PCs based on rival

Advanced Micro Devices

(AMD) - Get Report

processors in addition to Intel chips.

While Lenovo has not announced any specific Core 2 Duo machines yet, spokesperson Ray Gorman said the company would have systems based on Intel's new chip by the end of the third quarter in its ThinkPad and ThinkCenter products, as well as in its Lenovo product line.

Formerly known by the code names of Conroe (for desktop PCs) and Merom (for laptops), the Core 2 Duo completes a refresh of Intel's microprocessor product line, which accounts for the bulk of the company's sales and profit.

Last month, Intel released the first installment of the product refresh when it introduced the Xeon 5100, a new microprocessor targeting the lucrative market for corporate servers.

Intel's new chips are all based on a new microarchitecture and feature 65-nanometer circuitry, the most advanced in the industry. The result, says Intel, are chips that are designed from the ground up to offer power efficiency and take advantage of the dual processing cores that are the norm for today's PC microprocessors.

According to Intel, the desktop version of the processor, which features 291 million transistors, performs 40% better than the previous generation of desktop chips, while consuming 40% less power.

AMD was the first company to focus on the merits of energy efficiency and dual cores in processors, forcing Intel to play catch-up. Over the past year, AMD has seen it share of the worldwide PC microprocessor market rise from 17% to 21%, according to market research firm Mercury Research.

And AMD is investing billions of dollars in R&D and manufacturing facilities to achieve its goal of capturing 30% of the market within the next couple of years. On Monday, AMD said

it would buy graphics chipmaker

ATI Technologies

(ATYT)

for $5.4 billion in order to offer PC makers a complete chip solution.

But a fierce price war being waged by both companies is taking a toll, as bleak financial reports from Intel and AMD earlier this month made clear.

Last month, Intel announced it was selling off its handheld and communications processor businesses to

Marvell Technology

(MRVL) - Get Report

for $600 million. The company has also announced that it will lay off 1,000 managers and hinted at further possible headcount reductions.

Shares of Intel finished regular trading down .17%, or 3 cents, at $17.47.