Hector made one mistake: he didn't drop X2 prices sooner.
But that mistake is now forcing him to take the corrective action which is not too late. By selling X2s at around $125 or even lower, the $900 million inventory can be cleared by the time of K10 launch. Since AMD basically has one FAB (FAB38 will ramp down soon), its switch to K10 will be rather quick.
The above moves will deliver multiple blows to Intel.
First, the fire sale of X2s will make all Core 2s tough sale. AMD solutions are far more attrative when priced competitively---AMD solutions always come with good graphics, sufficient for Vista. Expect Intel to be seriously wounded in this first round.
Then, once the X2s are cleared, come the K10s with crushing performance advantage. This second blow may prove fatal to Intel. Don't be fooled by Intel's profit numbers, its cash flow that matters. To stay competitive, Intel has to spend a lot of cash on new FAB technology. AMD on the other hand, has no problems using Chartered and TSMC...
As of today, you can get a DELL Desktop PC with dual core X2 3600+ and Nvidia graphics, loaded with Vista, all for $339.