Updated from 4:44 p.m. EDT

SAN FRANCISCO -- Advanced Micro Devices ( AMD) posted another sizable loss in its third quarter, even as the chipmaker's top line benefited from strong demands for PCs.

And with a slew of new-product releases and various cost-cutting moves taking effect, the company said it was making progress in digging itself out of its hole.

"Every one of our business units is entering an exciting new product cycle," CEO Hector Ruiz told analysts in a post-earnings conference call Thursday.

"We are very encouraged with our progress, but dissatisfied with our financial results and working diligently to bring this company back to profitably as soon as possible," Ruiz said.

In the three months ended Sept. 29, AMD had a loss of $396 million, or 71 cents a share, vs. net income of $134 million, or 27 cents a share at this time last year.

The Sunnyvale, Calif., chipmaker's loss included $120 million, or 22 cents a share, in charges relating to its acquisition of graphics-chip company ATI and its stake in Spansion ( SPSN), a flash memory maker that AMD spun off in 2006.

Analysts were expecting a loss of 62 cents a share, according to Thomson Financial.

So far, AMD has lost about $1.6 billion this year. And while the company posted an operating loss in each of its three main business groups during the third quarter, AMD pointed out that its total operating loss in the quarter declined to half the level of its recent second quarter.

Gross margin showed a strong recovery, rising to 41% from 33% in the previous quarter, although still down markedly from the 51.4% level at this time last year.

AMD is locked in a fierce battle with Intel ( INTC), the world's No.1 chipmaker, which has recently unleashed a slew of new products. On Tuesday, Intel blew away Wall Street expectations when it delivered a 16% increase in revenue, thanks to strong worldwide demand for PCs.

AMD appears to have benefited from that demand as well.

Revenue of $1.63 billion outpaced Wall Street expectations of $1.52 billion.

AMD said sales of its microprocessors increased 19% sequentially, with shipments of mobile chips up 41%. AMD executives said they believed they took share from Intel in the mobile processor market during the quarter, and noted that average selling prices of mobile chips improved, in contrast to Intel, which noted a decrease in mobile prices.

Graphics-chip sales jumped 29% sequentially to $252 million, as the company booked the first full quarter of revenue from its new R600 chip.

On the other hand, AMD said prices for high-end server chips declined in the quarter, and estimated that the company may have lost 1% of market share despite releasing its quad-core Barcelona processor in September.

Executives said the company expected to ship hundreds of thousands of new quad-core chips in the current quarter, including Barcelona and a forthcoming desktop processor dubbed Phenom.

Whether that will be enough to return AMD to profitability remains to be seen.

Chief Financial Officer Robert Rivet reiterated his previous comments that getting back into the black will require $2 billion in revenue.

"We'll see in the fourth quarter. That's our goal is to break even. Maybe we have a shot at it," Rivet said.

But AMD's actual guidance for the fourth quarter was somewhat vague, with the company saying only that in the "seasonally up forth quarter, AMD expects revenue to increase in line with seasonality."

Company executives demurred when asked to quantify what seasonal growth in the fourth quarter entails, but noted that Intel -- which has projected a weaker-than-seasonal fourth quarter --- provides a valid view of current market conditions.

Analysts polled by Thomson Financial are looking for $1.7 billion in revenue with a loss of 33 cents a share in the fourth quarter.

Shares of AMD, which finished Thursday's regular session up 3%, were up 5 cents at $14.60 in extended trading following the release of the results.

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