(Corrects third quarter and revenue comparisons with Reuters Estimates in paragraph 7)
SAN FRANCISCO (Reuters) - Advanced Micro Devices Inc’s AMD.N graphics chips showed real strength for the first time, and the company surprised investors with quarterly results well beyond expectations.
Shares of AMD, which is about to become two companies, were up 10 percent in after-hours trading.
AMD bought graphics chip maker ATI Technologies Inc in 2006 for $5.4 billion but had problems digesting the Canadian acquisition, allowing rival graphics maker Nvidia (NVDA.O) to pull ahead.
But AMD came back with its ATI Radeon HD 4000 series last quarter, and the revenues contributed mightily to its better results.
“The numbers are really good, better than anybody would have expected,” said Doug Freedman, an analyst at American Technology Research.
AMD posted a net loss for the third quarter ending September 27 of $67 million, or 11 cents per diluted share. The company posted a loss of $396 million, or 71 cents per diluted share, in the same quarter a year earlier.
After excluding items such as license revenue, amortization charges, restructuring charges and discontinued operations, AMD’s loss per share was 18 cents, far better than the average analyst estimate of a loss of 39 cents a share, according to Reuters Estimates.
The company expects its current quarter revenue to be flat.
“We’re not planning on losing share. We’re just being cautious,” said President and Chief Executive Dirk Meyer.
In addition to graphics, AMD — Intel Corp’s (INTC.O) smaller rival — said its sophisticated quad-core 45 nanometer central processors will show up in servers shipped this quarter. Intel already sells 45 nanometer chips and AMD has been struggling to catch up.
“I believe they’re (AMD) being conservative and I believe that’s appropriate, but in the meantime they have offered proof that their execution has improved and we’re starting to see the results of that in their performance,” said JoAnne Feeney, an analyst with FTN Midwest.
Revenue from continuing operations rose to $1.78 billion. After excluding license sales, revenue was $1.585 billion, ahead of the average analysts’ estimate of $1.48 billion, according to Reuters Estimates.
Meyer said the company is pleased by the quarter, in particular the announcement that the company will split in two, with a foundry company and a design company. That will take effect at year’s end.
AMD shares rose to $4.55 after hours from the close of $4.12. The stock is down about 50 percent since the start of the year, compared with a 43 percent loss by the Philadelphia Stock Exchange Semiconductor Index .SOXX during the same period.
Reporting by David Lawsky; Editing by Andre Grenon, Phil Berlowitz