AMD’s introduction of its quad-core server processor is the beginning of a multi-market  blitz that will extend well beyond the client PC upward into the server market and out into the handheld consumer electronics world.

Hector Ruiz, the company’s chairman and CEO, said very clearly that the fruits of AMD’s acquisition of graphics processor maker ATI will soon become apparent. Exactly how soon is anyone’s guess, and judging from the delays in getting its quad-core server chip, code-named Barcelona, out the door, the timing may be a mystery even within AMD.

Nevertheless, it appears the marriage of ATI and AMD will turn out to be more than just a financial arrangement. In fact, they’re going to share the same real estate—on a piece of silicon that is—indicating that AMD will make a huge play for the consumer electronics market where the number of chips sold is measured in billions instead of millions.

Whether AMD will be successful in this foray is pure conjecture at this point. Its chief rival, Intel, has been targeting the consumer electronics space for years with its digital home initiative and other devices. Its success, so far, has been sparse. But at least part of Intel’s lackluster performance may be due to the fact that it wants to manage home networks and all the devices on it from a PC. AMD wants to power the devices themselves—something that will bring it into competition with a new set of rivals, including Texas Instruments, Freescale and NXP, among others.

But AMD also plans to hit Intel where it hurts the profit margins most, in the server space with its new quad-core server chip. The fact that Intel beat AMD to the punch on quad-core chips took a toll on AMD’s earnings. Now that the two are once again matched on technology (AMD even plans to boost the clock frequency this quarter to close in on Intel), AMD will play the game it always has. It will challenge Intel on price and erode the heftiest profits in Intel’s product line.

It now boils down to who can stand it the longest without screaming, “Uncle!”, and whether AMD can ever get out in front of Intel again on technology. A market lead in technology would allow AMD to hit Intel’s profits harder and to steal some of its business back. But Intel is no longer the sleeping giant it was when AMD began touting energy-efficient processors, and both are heading down the same path toward virtualization and boosting a customer’s return on investment.

All of this portends more price wars, more profit erosion, and an endless war of attrition. And that’s not something anyone should wish on their worst enemy—particularly when it’s likely to boomerang back home.