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Advanced Micro Devices is laying claim to the world's fastest graphics card at it continues an assault on Nvidia at the high-end of the graphics chip market.

HD 5970 packs two fast graphics chips

(Credit: Advanced Micro Devices)

As teased last week by AMD senior vice president Rick Bergman at a financial analyst meeting, the "Hemlock" graphics card--now officially called the ATI Radeon HD 5970--is AMD's top-of-the-line graphics product.

"It's in production. You'll be able to buy it at e-tailers around the world...Five Teraflops out of this baby," Bergman said last week. A teraflop is a trillion floating point operations per second, a key indicator of graphics performance.

Review site Tom's Hardware called it the "fastest discrete (standalone) card in the world."

The card integrates two graphics processing units (GPUs) for a total of 4.3 billion transistors. It also boasts 3,200 stream processing units and 160 texture units--tiny individual processors for accelerating graphics. And it supports Microsoft's DirectX 11 for speeding up graphics in Windows 7.

The 5970 will ship in Area-51 ALX and Aurora desktops from Dell's Alienware unit and allow "massive overclocking," according to AMD. Overclocking allows users to ratchet up chip speeds beyond the card's specified rating. "The unrivaled overclocking capabilities of the ATI Radeon HD 5970 are enabled by the unique design of the card, which features advanced fan and vapor chamber technologies and a fully vented exhaust to keep the card cool and ensure overclocking headroom using ATI Overdrive technology," AMD said in a statement.

A maximum resolution of 7680x1600 is achieved by driving up to up to three displays at once.

AMD cited games that will benefit from the card such as Electronic Art's Phenomic's BattleForge, S.T.A.L.K.E.R.: Call of Pripyat (GSC Game World), Battlefield Bad Company 2 (EA Dice), DiRT 2 (Codemasters), Aliens vs. Predator (Rebellion), and the update to The Lord of the Rings Online (Turbine).

Though prices will vary, some retailers are currently listing the price at $599.

Now comes the hard part for Advanced Micro Devices. It has to compete with Intel on the merits of its products.

After settling with Intel and walking away with $1.25 billion, how competitive is AMD's silicon? Some experts weigh in.

Two analysts that follow Intel and AMD said separately that AMD won't be competitive until 2011--at the earliest.

"The only chance for reaching any kind of parity is in 2011. They don't have anything on the roadmap until then," said Ashok Kumar, an analyst at Northeast Securities. In the interim, AMD will get by with about one-fifth of the processor market, according to Kumar. But whether AMD can expand its market share beyond this and be profitable--like Intel--isn't clear. "Intel can leave 20 percent of the unit volume for AMD but (AMD) will have to come up with a business model where it can return to profitability based on this."

AMD may have a chance to expand into more profitable segments if it executes well in 2011, according to another analyst. "AMD believes it's on the cusp of another cycle where they will have strong product offerings compared with Intel. I think this happens in 2011," said Nathan Brookwood, the principal at Insight64. "The products are innovative and have tremendous potential," Brookwood said, referring to the particulars of new chip technologies that AMD disclosed at its analyst day on Wednesday.

But these are big ifs. AMD must close a yawning gap with Intel that's not going to get any smaller because of the legal settlement. "Technically, Intel now has a definitive advantage, which may widen," said Roger Kay, president of market researcher Endpoint Technologies. Kay believes that AMD will have trouble keeping up with the feverish pace, referred to as "cadence," that Intel sets as it moves to each successive generation of chip manufacturing technologies--which, in turn, allows Intel to quickly introduce performance and power efficiency improvements in its processors. "AMD tends to be six months to a year behind Intel," Kay said, citing a statement made by AMD CEO Dirk Meyer at the company's analyst meeting on Wednesday. AMD may begin to close the gap more in the future "but there's no telling whether that will happen," Kay said.

Will AMD's 'Fusion' lead to a resurgence?

(Credit: AMD)

And if it doesn't happen, AMD becomes little more than a foil to keep Intel honest. "This settlement is actually proving the very point that Intel wants to keep AMD alive and able to compete at least in some small subset of the market, otherwise Intel will be faced with regulatory issues that they would rather avoid," said Avi Cohen, managing partner at Avian Securities.

AMD's best technology play to avoid this fate is "Fusion," Kay said, referring to a technology that combines the two key processors inside a PC: the main CPU processor and the graphics processor, or GPU. Fusion, however, isn't slated to come to market until 2011, according to the road map that AMD disclosed on Wednesday.

And what about today? Dan Ackerman, a senior editor at CNET Reviews and someone who regularly reviews AMD- and Intel-based laptops, makes an important point about the challenges AMD faces in the here and now: Intel-based laptops not only dominate the high end of the market but the low end, too. "Intel CPUs are found in almost all of the high-end systems (such as Core i7 laptops), and the low-end systems (Atom-powered Netbooks)," he said.

Ackerman said that AMD will be hard pressed to beat Intel head to head. "AMD has some room in to maneuver in the middle of the market--laptops from $600 to $900--but unless they can offer better performance for the same price, or a significant price discount to consumers, it'll be hard for the company to gain additional market share."

Rich Brown, a senior editor for desktops at CNET Reviews echoes Ackerman's sentiment: AMD competes by offering lower prices than Intel, not better performance. "From a tech standpoint, AMD's...desktop chips haven't been competitive since Intel launched Core 2 Duo. Instead, AMD has had to compete on price," Brown said.

The best action plan for AMD is to keep executing on key technologies and hope this eventually translates to market share gains. "AMD is rapidly developing a reputation for timely execution of marquee products/platforms," said Doug Freeman of Broadpoint AmTech in a research note. "AMD revealed that its newer platforms...are on track for [the first half of 2010]," he said, referring AMD's high-end server chip lines.

At the same time that Intel settled Advanced Micro Devices' antitrust lawsuit for $1.25 billion, the chipmaker settled another legal matter as well by hiring A. Douglas Melamed as its new top lawyer.

Melamed, who most recently worked as a partner at the law firm of WilmerHale, is expected to assume his new role this month, said a source familiar with the situation. Melamed has been based in Washington, D.C.

He has extensive antitrust experience, which could come in handy given Intel's remaining legal issues with the European Commission, the New York attorney general, and the Federal Trade Commission. From 1996 to 2001, he was acting assistant attorney general in charge of the Justice Department's Antitrust Division. Before that, he was the Justice Department's principal deputy assistant attorney general, where he was responsible for "civil non-merger and merger investigations and litigation involving most of the division's litigating sections; the division's appellate matters; policy matters involving, among others, the communications, electricity and tobacco industries; and international antitrust enforcement matters," according to WilmerHale.

Intel declined to comment on the matter. The Wall Street Journal reported the new hire Thursday.

Intel's previous general counsel, Bruce Sewell, left Intel to take the top legal job at Apple in September.

Even for a company as powerful as Intel, with $13 billion in cash on the books, $1.25 billion is a lot of money. So why drop that huge quantity of money in the lap of its biggest rival, Advanced Micro Devices?

The payment is, of course, to settle the antitrust suit AMD brought against Intel five years ago. AMD's stock surged 22 percent Thursday after the chipmakers announced the agreement, but Intel's share price dropped 1 percent, indicating which company the investors thought got the better deal.

Paul Otellini, speaking in September and holding a wafer of silicon chips

(Credit: Stephen Shankland/CNET)

AMD does indeed come away with some serious perks--not just the cash, but also a new patent cross-license agreement that removes Intel's objections to AMD spinning off its chip-manufacturing business, enables multiple manufacturers to build AMD's chips, and eliminates the earlier patent agreement's payments to Intel. And it has Intel's agreement not to violate a list of restraints on its business practices.

But Intel gets something out of this, too.

Spend now, save later
Let's start with the money. Sure, shareholders likely frowned when they heard Intel's fourth-quarter expenses are expected to climb from $2.9 billion to about $4.2 billion. But Intel could have been out a lot more money if things had gone south.

In the European Union, Intel is wrestling with an antitrust case that produced a fine of 1.06 billion euros, or $1.6 billion at today's exchange rate. Intel appealed the European Commission fine, but it's a very concrete example of just how severe the Intel punishment could be.

There are other financial factors, too. Intel and AMD were set to begin their jury trial in March, and jury trials are famously unpredictable. Add on top of that risk the fact that antitrust suits can come with triple damages.

"It was a small multiple of the damage that could be awarded in a jury trial," Intel Chief Executive Paul Otellini said of the price tag in a conference call earlier Thursday.

Treble damages of the scale of just the European Commission fine would have been more than $4 billion, Technology Business Research analyst John Spooner observed. Facing that prospect, "Intel chose to control its own destiny and settle up front."

Taking commercial cases to a jury trial is indeed risky, said Richard Brosnick, who's involved in antitrust law at the firm of Butzel Long.

"Any complex commercial case going to the jury phase is challenging, and antitrust, given the economics, is probably more challenging," Brosnick said. "Trial is expensive overall, not in billions, but in terms of the risk you'll be able to explain these issues in a way that will be understood by and persuasive to a jury."

Goodwill in other antitrust cases
AMD's antitrust case isn't the only one Intel faces. It's also got the European Commission fine discussions, a new antitrust lawsuit from New York Attorney General Andrew Cuomo, and an antitrust investigation from the Federal Trade Commission.

The AMD settlement doesn't make those cases evaporate, but Intel hopes it'll help.

"We hope that having this major litigation settled with AMD would be viewed favorably by these regulatory bodies and eventually the cases would be dropped," Intel spokesman Tom Beerman said.

Certainly those regulators won't face as much of AMD's active prodding. Among the terms of the settlement is this, regarding all the regulatory actions AMD is involved in:

AMD agrees to promptly...notify in writing each authority...that except as provided in Section 3.5 AMD has resolved its disagreements with and complaints concerning Intel contained in that Administrative Complaint and believes that this Agreement provides AMD with fair compensation for any and all actual or alleged harm and damages that AMD did or may have suffered in connection with matters discussed in the Administrative Complaint. In addition, AMD agrees that it will not ghost-write or edit any other briefs, pleadings, or "friend of the court" or "friend of the tribunal" materials or briefs in any Administrative Action.

But whether Intel will actually get what it wants isn't certain.

"It's certainly possible that the public agencies will view this as a compromise they can live with, but it's equally possible not," Brosnick said.

One issue is Intel practices described in the section 3.5 mentioned above, where AMD and Intel still disagree. Brosnick said the governmental agencies still might be concerned about any of those practices--called "retroactive discounts," "accused bid bucket," and "accused end-user discounts" in the settlement.

Intel digging in its heels?
Though the agreement didn't preclude those practices as it did some others, it did agree not to defend them as hard as it might in settlement talks with the government organizations.

"Intel agrees that in the event it enters into voluntary settlement discussions with a government authority in the EC litigation, New York litigation, or the FTC investigation, and if such government authority proposes to include in a consent judgment or other governmental order a prohibition against Retroactive Discounts, Accused Bid Buckets or Accused End-User Discounts, Intel will not challenge such a prohibition as a general matter, although it may challenge the scope or specific language of the prohibition," the settlement agreement said.

Just how deeply Intel will dig in its heels in the other cases remains to be seen. Although it settled a big case, Otellini hardly sounded contrite. He reiterated on several occasions his belief that Intel didn't do anything illegal. He said airing the full context of seemingly incriminating e-mail would show Intel in a better light. And he vehemently attacked the New York case.

"We strongly disagree with the New York attorney general case and believe the complaint is entirely without merit," Otellini said. "Discounts and rebates are entirely fair business practices, and it's unfortunate the New York attorney general chose to distort the facts. We would have preferred to engage in a dialog with the New York attorney general."

Then again, Intel spoke in strong terms about the AMD trial. Perhaps Intel's pragmatic side will show in the other cases next.

The settlement between Intel and Advanced Micro Devices isn't just a matter of business between companies.

Sure, it's a big financial deal when the biggest chipmaker in the world forks over $1.25 billion to its closest competitor. And the settlement, announced Thursday, officially puts an end to a five-year battle over licensing disputes and AMD's complaints of unfair competition.

Beyond that, there will also be an effect on the two chipmakers do business with PC makers, and how they price their chips. Still, the settlement won't likely foment major changes for consumers shopping for a new laptop or desktop.

Choice
AMD processors are readily available from most PC makers, the major exception being Apple. If you really wanted one before the settlement came along, it's not like you couldn't get an AMD-based machine in stores or online. Intel now has agreed basically to not punish PC makers that choose to put AMD chipsets in some of their machines, but that doesn't mean Hewlett-Packard, Dell, Acer, Apple, and others will suddenly want to use AMD's latest chip in their flagship products. AMD will probably continue to be used as the "value" option for PC makers looking to offer cheaper notebooks.

PC prices are already pretty low thanks to the Netbook movement brought on by Intel, Acer, and others.

(Credit: Acer)

That said, there is room for AMD to increase its share in processors used in laptops. The company has made improvements in that area recently, particularly in the ultrathin category, according to observers. So if you're paying attention, you might see more from AMD when shopping for a new laptop.

Prices
My colleague Brooke Crothers made an excellent observation last week, that Intel, while accused of dampening competition with AMD, has actually kept prices very low for consumers buying laptops. Thanks to the Netbook movement, which Intel spurred with its Atom chip starting in late 2007, the average price of the small, lightly featured Netbooks is now below $500. While not everyone is in the market for a Netbook, all shoppers have ended up benefiting. In order to recoup some of the lost profit due to the popularity of Netbooks, the industry--led by AMD and its consumer-ultra-low-voltage chips--has now focused on selling ultrathin laptops, which typically cost somewhere between $500 and $900.

Though one might assume that Intel and AMD hitting reset on their competition and going head to head would bring prices down, that's not likely. If anything, prices may actually go up a bit, said Gartner analyst Martin Reynolds.

"This [settlement] potentially means that products cost a little more to manufacture because we don't have this irrational competition between the two," he said. "[PC makers] won't be able to pit the two against each other as much."

Speed to market
What matter to consumers most are price and capability. What matters to Intel and AMD is getting faster, cheaper processors that enable better battery life in laptops into as many new computers as possible. The speed of this cycle is very important. The faster the two companies come out with new products, the more often people will go shopping for new laptops.

AMD's product road map has severely suffered in comparison to Intel's over the last several years. Intel whips out new products on a regular yearly schedule. A quick infusion of $1.25 billion from Intel should do a lot to help AMD fund new product design in order to better keep up. Again, there won't be a significant change immediately, but over time we may see their speed to market pick up, Gartner's Reynolds noted.

Besides money, the end of the legal squabbling also means that AMD is freed up from focusing on the lawsuits and what Intel has done wrong, and can help the company focus on the task at hand: making good products at reasonable prices. So if not directly, the settlement will at least indirectly benefit those looking for laptops and desktops at their local retailer or online.

Of course the vast majority of shoppers, outside of those tuned into technology, probably won't pay much mind to whether there's Intel or AMD inside the laptop as long as it meets their expectations, said analyst Michael Gartenberg.

The buying decision is actually very simple usually, he said. "Does it even matter anymore? It's about who's delivering the cool machines at the price that I want."

Burying a very large hatchet in the computing industry, Intel has agreed to pay Advanced Micro Devices $1.25 billion as part of a settlement of a long-running antitrust case.

The pact, announced Thursday, resolves the private antitrust lawsuit AMD filed in 2004 and extends the companies' patent cross-licensing agreement. The new patent arrangement removes hindrances to AMD's effort to spin off its chip manufacturing business and to have other manufacturers build its processors.

In addition, Intel has agreed to "abide by a set of business practice provisions." Check below for a full list.

In turn, AMD says it will drop all pending litigation, including the case in U.S. District Court in Delaware and two cases pending in Japan, and will also withdraw all of its regulatory complaints worldwide.

AMD investors were delighted, sending the company's stock up 21 percent to $6.46 in morning trading. Intel's stayed flat at $19.84.

"While the relationship between the two companies has been difficult in the past, this agreement ends the legal disputes and enables the companies to focus all of our efforts on product innovation and development," the chipmakers said in a joint statement.

Government cases unaffected
Well, it probably won't end everything exactly. The settlement between the companies doesn't stop antitrust cases brought by governments.

After AMD filed its case in 2004, European regulators brought a separate case that led to a $1.5 billion fine, which Intel is now appealing. And last week, New York Attorney General Andrew Cuomo filed another antitrust suit against Intel.

"Those cases filed by those government regulators will continue," Intel spokesman Tom Beerman said. "We will continue at the same time to work with the regulatory bodies to work on those issues."

Added AMD's Drew Prairie, "We've notified the regulatory authorities of the settlement. They didn't have ongoing investigations because of us...That's a snowball rolling downhill."

Intel still must reckon with an investigation from the Federal Trade Commission, too. "Certainly we plan to review the settlement between Intel and AMD in their private litigation. The FTC has an ongoing independent investigation of Intel's practices so we cannot comment further at this time," FTC Chairman Jon Leibowitz said in a statement Thursday.

The European Commission didn't comment on whether Thursday's settlement would affect discussions about Intel's fine, but did say the agreement doesn't affect its regulatory scrutiny of the chipmaker.

"Intel has an ongoing obligation to comply with the Commission's May 2009 decision and with EU antitrust law," said spokesman Jonathan Todd. "The Commission continues to vigorously monitor Intel's compliance with its obligations under the May 2009 decision."

The cross-license agreement has been updated to reflect AMD's move to spin off its processor manufacturing business into a separate company, Globalfoundries, which currently is an AMD subsidiary. Under the updated agreement, AMD will be able to operate as a "fabless" processor company--one that relies on others to build its chips. In addition, Globalfoundries "is free to operate independently and go after third-party business without issues," Prairie said.

Another change: in the earlier patent cross-license agreement, AMD had to pay Intel royalties. Now neither company makes payments, Prairie said.

Intel: Settlement was 'practical'
Intel Chief Executive Paul Otellini didn't show much in the way of contrition in a conference call.

"We have competed fairly and legally," Otellini said, including the price discounts it offered computer makers as incentives to use Intel chips. In the United States, 98 percent of private antitrust cases are settled, he added. "It pains me to write a check at any time, but in this case it made a practical settlement. It was a good compromise between the two companies. In many ways it was a small multiple of the damage that could be awarded in a jury trial."

And Andy D. Bryant, Intel's chief administrative officer, said the restraints Intel agreed to don't really change Intel's behavior in practice, because it wasn't doing those things in the first place.

"AMD believes we have done business in some fashion they believe is inappropriate," such as punishing computer makers that don't buy a certain amount of chips from Intel. "We have said we don't do the acts they say we're doing...There are no changes to pricing practices as a result of this contract."

He did add that Intel changed some pricing practices as a result of the European Commission case.

Intel also said that as a result of the settlement, its fourth-quarter spending will increase from its earlier projection of $2.9 billion to about $4.2 billion; Intel is paying cash within 30 days. However, Intel's effective tax rate should decline from 26 percent to 20 percent for the quarter, Intel said.

A new relationship
The companies didn't agree to become best friends, but AMD and Intel are turning over a new leaf, moving toward "fierce but fair" competition, Tom McCoy, AMD's executive vice president of legal, corporate and public affairs, said in a conference call.

"With this agreement, we are trying to reset our relationship between AMD and Intel," McCoy said. That relationship has been "intense, emotional, and acrimonious for all too many years...We wanted to put this behind us. We didn't want pressures to build up. We wanted a healthy, normal relationship. Therefore we will see in the agreement, a thought-out procedure [through which] we will build trust and try to resolve our differences before spilling into the courts or into [the] public affairs domain."

Intel's Bryant said the agreement includes mechanisms for mediation and arbitration that provide "a very thorough ability to...resolve differences."

The constraints on Intel's practices caught the attention of Richard Brosnick, an attorney at Butzel Long who focuses on antitrust law.

"In settling a suit that arose from claims that steep discounts were anticompetitive, Intel has now agreed with its rival to a set of 'business practice provisions' that will presumably limit Intel's ability to compete with AMD on price," Brosnick said. "Of course any analysis would depend on the details of the deal, but as a general antitrust matter, I'd call that ironic to say the least."

Intel's restraints
According to AMD, Intel will refrain from these practices:

• Offering inducements to customers in exchange for their agreement to buy all of their microprocessor needs from Intel, whether on a geographic, market segment, or any other basis

• Offering inducements to customers in exchange for their agreement to limit or delay their purchase of microprocessors from AMD, whether on a geographic, market segment, or any other basis

• Offering inducements to customers in exchange for their agreement to limit their engagement with AMD or their promotion or distribution of products containing AMD microprocessors, whether on a geographic, channel, market segment, or any other basis

• Offering inducements to customers in exchange for their agreement to abstain from or delay their participation in AMD product launches, announcements, advertising, or other promotional activities

• Offering inducements to customers or others to delay or forebear in the development or release of computer systems or platforms containing AMD microprocessors, whether on a geographic, market segment, or any other basis

• Offering inducements to retailers or distributors to limit or delay their purchase or distribution of computer systems or platforms containing AMD microprocessors, whether on a geographic, market segment, or any other basis

• Withholding any benefit or threatening retaliation against anyone for their refusal to enter into a prohibited arrangement such as the ones listed above.

Those constraints will benefit the chipmakers' customers, computer makers such as IBM, Hewlett-Packard, and Dell, McCoy said.

"When we aggregate all these things together, we believe we have delivered to [the] marketplace and to mutual customers something they've wanted, which is more freedom of action to choose," McCoy said.

Updated at 7:00 a.m., 7:30 a.m., 7:56 a.m., 9 a.m., and 10:50 a.m PST with further details and comments.

Advanced Micro Devices CEO Dirk Meyer on Wednesday addressed the latest antitrust lawsuit filed against Intel, saying his company's claims about Intel's alleged illegal behavior have been "ratified" worldwide.

AMD CEO Dirk Meyer addresses analysts on Wednesday.

(Credit: AMD)

"We've said for a long time that our success in the marketplace was hampered by anticompetitive behavior on the part of our competitor [Intel]," Meyer said. "And I think it's clear over the last 12 months that we've seen our statements be ratified...by regulators around the world. We've seen action in the EU take place this year. And just last week we saw the action of New York State's attorney general office," he said.

Meyer made the comments at the AMD Financial Analyst Day, which was streamed live from company headquarters in Sunnyvale, Calif.

"As you know, we have a court date scheduled in March," Meyer said. "So, in summary, I'm looking forward to a future in which our ability to succeed as a business is really governed by the quality of our products and the quality of our customer relationships. And I can tell you that hasn't always been true. But in the future that will be increasingly true. So, access to customer demand is key. "

Intel declined to comment.

New York Attorney General Andrew M. Cuomo filed a federal lawsuit against Intel earlier this month accusing it of paying computer makers rebates to illegally maintain its monopoly power and preventing AMD from gaining business with PC makers.

In a similar case earlier this year, the European Commission fined Intel $1.45 billion, alleging illegal rebates to PC makers such as Dell and Hewlett-Packard. AMD also made analogous allegations in its case filed against Intel in June 2005 that is slated to come to trial in March 2010.

And this may not be the last major case filed against Intel that makes these allegations. The Federal Trade Commission may also bring charges against Intel, according to reports.

Advanced Micro Devices discussed the Hemlock high-end graphics card due next week and third-generation ultra-thin laptop technology, among other topics, at the AMD Financial Analyst Day on Wednesday.

AMD Vice President Rick Bergman holds up the 'Hemlock' graphics card at AMD Financial Analyst Day on Wednesday. The product is due next week.

(Credit: AMD)

"Hemlock will get launched next week," said AMD Senior Vice President Rick Bergman, speaking Wednesday morning at the conference which was streamed live. "It's in production. You'll be able to buy it at e-tailers around the world. You can see there are two GPUs. Five Teraflops out of this baby," he said. (GPU stands for graphics processing unit. A teraflop is a trillion floating point operations per second, a key indicator of graphics performance.)

Hemlock is expected to be appear as an HD 5900 series product--what some reports have called the HD 5970.

Bergman also addressed AMD's third-generation "Nile" ultra-thin laptop platform. "Bring the real PC experience into the ultra-thin. Battery life well north of seven hours," Bergman said. This is due ... Read more

PC processors are the latest tech segment bouncing back from the recession.

Third-quarter shipments of computer processors, or CPUs, climbed 23 percent over the second quarter of 2009, doubling typical growth and setting a record for sequential growth, according to an IDC report released Monday.

Revenue from processor sales also bounced back to hit $7.4 billion, a 14 percent gain over the second quarter, according to IDC's "Worldwide PC Processor 3Q09 Vendor Shares" report.

IDC viewed the record levels in shipments as a promising sign in economic recovery.

"Most meaningful about 3Q09 is that, since PC processor shipments overall just slightly exceeded shipments in 3Q08--which was itself a record quarter at the time--we know that the processor market is recovering," Shane Rau, IDC's director of semiconductors for personal computing research, said in a statement.

With the popularity of Netbooks, mobile processors such as Intel's Atom chip drove much of the growth. Shipments of the mobile CPUs jumped 35.7 percent over the second quarter, while desktop processor shipments rose 11.4 percent sequentially. Since mobile processors are cheaper than their desktop counterparts, their growth in revenue trailed the growth in shipments.

"The story about 3Q09 leads with Atom processors being sold in mini-notebooks (a.k.a. Netbooks) manufactured and sold in China," said Rau. "While Atom processors led the PC processor market to reach record unit shipments, on the revenue side, their low average selling price led to notable price erosion, more than 7 percent."

Among vendors, Intel kept its place at the top of the charts, enjoying an 81.1 percent share of the worldwide market for processor shipments. That left AMD with 18.7 percent and third-place Via Technologies with 0.2 percent.

By processor type, Intel captured 88 percent of the mobile PC processor market, leaving Advanced Micro Devices with 11.9 percent, and Via with the rest. For desktop CPUs, Intel's slice was smaller at 72.2 percent, while AMD grabbed a 27.4 percent chunk and Via held a 0.3 percent share.

Solid demand so far in the fourth quarter led IDC to raise its expectations for 2009. The firm is now eyeing more than 300 million shipments of processors for the year, a gain of 1.5 percent over 2008.

Still, since much of the growth came from low-cost mobile processors and certain areas of the economy remain sluggish, IDC is cautious about early 2010.

"The market's growth has been due to shipments of inexpensive Atom processors being sold into markets like China, which is being stimulated by government incentives there," Rau said. "The Chinese market can be very opaque--there are lots of places where inventories can hide. We have to be on the lookout for when China decides it can't consume more processors. Meanwhile, the U.S. market is still hamstrung by housing foreclosures and rising job losses."