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Y. Edwin Mok, an analyst at Needham, today asserted in a research note that price competition between Intel (INTC) and Advanced Micro Devices (AMD) in the microprocessor market “has intensified.”

Mok says AMD has engaged in “frantic price cuts” after a weak start to the first quarter, and that Intel will likely feel pressured to respond with cuts of its own. “We would avoid both names here, as we believe lower prices and higher capital spending may continue to limit margins,” he writes.

Mok contends AMD has cut prices three times in three weeks to spur demand. He says AMD is offering “very competitive pricing” to Dell (DELL) in order to win more market share, and that as a result its penetration at Dell has improved. Meanwhile, he also notes that Microsoft (MSFT) Windows Vista is not driving incremental PC demand. Results from Asian PC makers “show seasonal declines in January,” he says, demonstrating that “the launch of Windows Vista is not driving a pop in near-term demand.”

Finally, Mok says that, while there are market rumors that Intel has pushed out some equipment orders for its 45 nm production lines now under construction, he says his sources see no change in Intel’s spending plans.

This morning, AMD is down 3 cents at $14.66; Intel is up 7 cents at $20.87.

AMD vs. INTC 1-yr chart

amd intc chart

Source: Intel: Price Competition with AMD Heating Up