On first blush, investors warmed to

Advanced Micro Devices'

(AMD) - Get Report

plan to sell its flash memory unit in an initial offering.

But will they feel the same way in the morning?

The company will be letting go of a third of its revenue base in return for ending its exposure to violent fluctuations in supply and prices that characterize this commodity memory. Without flash memory, AMD will now be solely a maker of computer microprocessors.

AMD says this was the plan all along with

Spansion

, the flash unit that it owns along with

Fujitsu

: "We are executing on a strategy which we embarked on two years ago to make Spansion financially independent," said AMD CFO Bob Rivet during a conference call late Wednesday.

Still, the company didn't float the IPO idea until its flash business caused it to miss Wall Street earnings targets for two straight quarters. AMD's stock has fallen 23% this year.

Now, AMD is left with one front on which to battle

Intel

(INTC) - Get Report

, the world's largest computer chipmaker and AMD's primary rival. Intel gets its chips in four of every five computers sold around the world, but AMD has been fighting back the last few years.

AMD has bolstered its technology and manufacturing capabilities, expanding its production, working harder to be more reliable, and becoming more of an innovator instead of a copier.

The main beneficiaries of these improvements have been AMD's microprocessors. AMD now participates in the server market and designed a chip exclusively for mobile computers. AMD also created a new design for placing more than one processing core on a single piece of silicon.

The net of these improvements has been that AMD's computer chip unit has generated operating profits for AMD during each of the previous seven quarters.

Still, the computing market is maturing -- and that will be glaringly obvious without another product line to shoulder some of the burden.

To offset a maturing computer market, look for AMD to try and expand into new markets with its computer chips.

The company provided a clue about this strategy in a press release late Wednesday that got plowed under by announcements about its

worse-than-expected financial results and the IPO.

AMD combined its chip businesses into a "microprocessor solutions sector." The company said in its release that realigning its chip divisions this way will allow it to reach "a wider range of customers and markets around the world." AMD specifically cited markets such as consumer electronics and embedded applications, which would include automotive electronics, networking and telecom equipment.

The financial impact of getting rid of Spansion is unclear, but AMD said it will work toward a debt-to-capital figure of 20% and gross margins above 60%. AMD's current debt-to-capital is around 31%, and its margins in the first quarter were 34.1%.

Expect AMD to retain a stake in Spansion for the immediate term and possibly longer. Terms of the IPO have not yet been set, but AMD and Fujitsu will have board representatives after the company goes public. Rivet said that AMD will maintain a minority interest in Spansion.

AMD showed strong results from its flash memory moves for over a year, but then Intel bit back and took a chunk out of AMD. Now AMD has run away. Intel has also made strong moves lately in its primary computer chip business, but AMD can't run away from this market -- it's all the company has left.