It seems inevitable that any company that's been around long enough would make a misstep or a series of bad judgments and suffer the consequences. Such is the dilemma that Intel has found itself in recently.
Until recently Intel seemed untouchable. Riding high on Moore's law (processing power doubling every 18 months) , it kept cranking out various processor models for all sorts of computers from laptops to high-powered multi-processor servers. Older processors would also continue to flourish as their prices eased and they found home in a litany of smaller embedded devices.
AMD, Intel's arch nemesis seems to have always been around. Mostly living in the shadow of its much bigger rival, it has had a rocky history of violent profit and loss swings, but no matter what, it seemed to always hang in there, albeit as a small distraction rather than a competitor to be taken seriously.
But suddenly the 64-bit revolution changed all that. Intel's bet was on Itanium (IA64), a powerful 64-bit chip that blew past prior performance metrics, but was hardly backwards compatible. That meant that 32-bit programs (which still comprise the lion's share of the software market) couldn't run on Itanium, at least not natively. That meant that all those programs had to be recompiled under the IA64 platform, and in some cases that meant large alterations (hence, large expenses) which many companies balked at.
Realizing a golden moment, AMD seized the opportunity and delivered the x64 Opteron architecture. It wasn't a match for IA64's power, but it could run 32-bit applications natively without any modifications. It was the dawn of the 64-bit architecture bifurcation, and in hindsight, AMD had the better strategy. The market had clearly chosen the x64 architecture over the IA64. It didn't take long for Intel to recognize its mistake, and today Intel also produces processors with the x64 architecture alongside the IA64.
The blunder put Intel in a catch-up mode with AMD, but AMD has been smart enough to build on its momentum and snare a number of important vendors, the latest being Dell. To be sure, Intel is still a much larger and more diversified company than AMD, its market capitalization dwarfs that of AMD by a 10 to one ratio. It won't be easy to stay ahead of Intel for long and AMD must recognize that it has finally awakened a sleeping giant that is now in hot pursuit. One must assume that the phrase coined by Intel's ex-chief rings loud in AMD's hallways today: "Only the paranoid survive". It had better kick up the paranoia factor much higher if it intends to survive or even win this battle.