Advanced Micro Devices Inc yesterday outlined plans to claw its way back into financial stability as it unveiled third quarter results that were worse than market watchers had feared.

The CPU and flash memory vendor unveiled sales of $506.2m for the quarter ending September 29, a drop of 33.6% on the previous year. Operating losses were $325.2m, compared to losses of $229.6m last year. Net losses were $254.2m, compared to last year's $186.9m. The company's loss per share was $0.74.

The sales figure was in line with the forecast AMD issued earlier this month, when it warned that inventory reduction efforts would undermine revenues. However, while AMD had warned it would report a substantial operating loss, Wall Street had been expecting the company to report a loss per share of $0.67.

AMD has tripped up badly this year, and CEO Hector Ruiz admitted that the company's operating losses in the second and third quarters were "unacceptable."

However, it sought to soften the blow with a fourth quarter outlook that predicted a strong rebound in sales, and by detailing a plan to regain financial stability, and return to breakeven.

The inventory corrections which depressed the company's sales in the third quarter were the first phase of a program to regain financial stability said Ruiz. The second stage was to increase operational flexibility and position itself to take full advantage of all available opportunities. The company was also working to strengthen its capital structure, he said.

Flash memory sales should increase significantly in the fourth quarter, said AMD, and PC processor sales should also increase, on the back of seasonal demand and better-balanced inventory in the supply chain. The company said it expects fourth quarter sales to improve "significantly", and to "significantly" reduce its operating loss in the fourth quarter compared to the third.

In a conference call with analysts, Ruiz said he expected fourth quarter revenues to be up 20% on the preceding quarter, and that the firm would be operating at break even by the second quarter of next year.

For the year to date sales were down 31.6% to $2bn. Net losses so far are $448.2m, compared to the previous year's losses of $44.7m.

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