AMD Gets Back in Black

Updated from 4:51 p.m. EDT

Advanced Micro Devices(AMD Quote) exceeded Wall Street's financial targets for the second quarter as it posted a profit for the first time in nine months.

AMD cited record gross margins for its computer microchips, specifically its chips used in servers and laptops, as drivers of its results. AMD's memory group posted a steep loss, but the top and bottom lines for the unit both improved from the previous quarter.

The results pushed AMD shares up 2.8% to $19.78 on Instinet in the late session. A jump above $20 would be a first since early January.

For the quarter ended June 26, AMD earned $11 million, or 3 cents a share, on sales of $1.26 billion. During the same quarter last year, AMD earned $32.2 million, or 9 cents a share, on sales of $1.26 billion.

Analysts had expected a loss of 5 cents a share on sales of $1.22 billion, on average, according to Thomson First Call. The bottom line range was wide, however, with expectations spanning a loss of 17 cents to earnings of 5 cents.

At the quarter's start, AMD only said microprocessor sales would be flat to slightly down; it didn't disclose expectations for its memory unit, which AMD has said it would like to spin off via an IPO.

For the third quarter, AMD said its computer chip sales should "exceed normal seasonal patterns" and the company again declined to project results for its memory unit.

Analyst Eric Ross with ThinkEquity Partners said AMD's microprocessor business is doing well, but memory remains stuck. Ross doesn't own the stock and his firm doesn't have an investment banking relationship with AMD.

He said the run-up in the stock has been overdone considering the overhang that the flash unit creates, but investors continue to find reasons to buy in. During the past three months, shares are up almost 40%. Ross said that's too much for what essentially is a break-even quarter.