UPDATE 3-AMD loss beats Street, but shares slide

* Q3 EPS 18 cent loss versus Street View 42 cent loss

* Q3 revenue $1.4 bln vs Street view $1.26 bln

* Shares slide 5 percent (Recasts, adds analysts' comments, share move)

By Ian Sherr and Clare Baldwin

SAN FRANCISCO, Oct 15 (Reuters) - Strong notebook processor sales helped Advanced Micro Devices Inc (AMD.N) post a narrower than expected loss and turn its core chipmaking business profitable, but the results failed to excite investors, who sold off its shares.

The stock of the chip maker -- which has posted 12 consecutive quarters of losses -- slid 5 percent as investors took profit after a 60 percent run-up over the past three months on growing hopes of a sustained recovery in the technology sector, underscored by stellar earnings from bellwether Intel Corp (INTC.O) this week.

Even with the day's drop, AMD's shares are up 11 percent from the start of last week.

"There's still some skepticism out there about their ability to sustain the success," said FTN Equity Capital Markets analyst JoAnne Feeney. "But if you look carefully at the products that they're offering, and the quality is improving, they're becoming more appealing as a source for the major PC OEMS."

AMD has bled market share steadily to Intel in past years. Chief Executive Dirk Meyer said in May that he expected the company's core business to make a net profit by year's end, with the PC market potentially stronger in the second half.

On Thursday, the company said AMD Product Co eked out a net profit of $2 million.

But the company's other major division, its contract chip manufacturing or foundry operations, remained in the red.

The perennial No. 2 to Intel forecast fourth-quarter revenue would be "up modestly," with the chief executive elaborating later that it was guiding moderately.

"At this point we're calling moderate, which is a little bit less bullish than average seasonality," Meyer said, referring to normal seasonal sales patterns.

Before the quarterly results were released, analysts had expected fourth-quarter revenue of $1.36 billion.

The shares of the Sunnyvale, California-based company were down 5 percent after-hours at $5.88 after closing down 1 percent at $6.19 in regular-session trading on the New York Stock Exchange.

AMD posted a net loss of $128 million, or 18 cents per share, for the third quarter, ended Sept. 26, compared with a net loss of $134 million, or 22 cents per share, a year ago.

Analysts, on average, expected a loss of 42 cents a share, according to Thomson Reuters I/B/E/S.

Revenue plunged 21.3 percent to $1.4 billion from $1.78 billion a year ago, but came in ahead of the $1.26 billion expected by analysts.

"Now that they've achieved that, I think the incremental upside in Q4 is probably minimal and at this point, we're seeing investors lock in some of those profits," said Patrick Wang, analyst with Wedbush Morgan Securities.

This year, AMD spun off its semiconductor manufacturer Globalfoundries -- effectively splitting itself into a contract chip manufacturer and a core chip design or "product" company -- which since expanded to create ARM-based chips as well. (Reporting by Ian Sherr and Clare Baldwin; editing by Edwin Chan and Andre Grenon)