AMD Gets Back in Black

"Until someone buys or they spin off the flash unit, it will continue to be a drag on earnings," Ross says. "They will never get the results Intel has while they have such a big flash business."

Flash memory made up 37% of AMD's sales while Intel(INTC), AMD's primary rival, generates less than 10% of its sales from flash.

AMD's gross margin was 39%, up from 34% in the previous quarter and above the 38% in the second quarter last year. The company has long-term targets of 60% margins, but that takes into consideration the memory group's spinoff.

AMD recorded an operating profit of $110 million and sales of $767 million within its computation products group, which includes PC, server and laptop chips and chipsets. In the previous quarter, this unit posted a $92 million operating profit on sales of $750 million.

Selling prices rose 6% for its computer processors, likely stemming from AMD's server and laptop chips, which command premium prices. Geographically, sales were strong in China, North America and developing markets, the company said.

Its memory group lost $90 million on sales of $462 million in the second quarter vs. an operating loss of $110 million on sales of $447 million in the first quarter and an operating profit of $45 million on sales of $673 million in the second quarter last year.

Unit shipments rose 12% sequentially in the memory group and AMD said sales of its MirrorBit flash memory, an advanced technology that AMD says carries a cost advantage over competing technologies, grew to 20% of total memory sales with increased wireless demand.

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