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Advanced Micro Devices Inc. yesterday reported a narrower loss than expected for its third quarter on increased sales of its microprocessors and graphics chips, the company said.

It was AMD's eighth consecutive quarterly loss but a much smaller one than the year before. The loss was $67 million, or 11 cents per share, compared with a loss of $396 million, or 71 cents per share, in the third quarter of 2007. Revenue climbed 14% to $1.78 billion, from $1.56 billion a year earlier.

The net loss is based on generally accepted accounting principles. On a non-GAAP basis, excluding a loss of $108 million from discontinued operations, as well as other charges, AMD said it would have reported a profit for the quarter of $80 million.

The revenue and profit figures both came in ahead of analyst forecasts, according to Thomson Reuters.

"AMD had a well-executed third quarter in the context of a challenging environment," Chief Financial Officer Bob Rivet said on a conference call. "We reached our goal of achieving operating profitability."

Revenue from AMD's microprocessor unit climbed 8% year over year to to $1.39 billion, while revenue from its graphics business climbed 40% to $385 million. The growth came from AMD's quad-core Barcelona server processor, which had its first full quarter of shipments following delays, and from new Radeon 4000 graphics chips that shipped during the quarter.

The graphics business, which AMD acquired when it bought ATI Technologies Inc. two years ago, turned an operating profit for the first time, Rivet said.

AMD expects servers based on its new Shanghai processor, which uses a more advanced 45-nanometer manufacturing process, to be available in a few weeks, said President and CEO Dirk Meyer. Desktop PCs based on 45-nanometer processors will be available early in the first quarter of next year, he said. The number refers to the dimension of circuits etched on the chips, and the more advanced process should mean faster, less power-hungry products.

AMD announced a plan last week to stem its losses by spinning off its chip-manufacturing business into a separate company. Analysts said the move could help AMD return to profitability by freeing it of the costly burden of building and maintaining its own manufacturing plants. AMD would continue to design and sell its chips but have them manufactured by a third party.

AMD's shares were up 5% ahead of the financial report, closing at $4.12 per share. The stock moved 9% higher after the report was issued, climbing to $4.50 per share in after-hours trading.

Financial results are being closely watched this quarter as the industry tries to weigh the impact of the emerging financial crisis in the U.S. on customers' IT spending. The news so far has been mixed.