Shares of Advanced Micro Devices Inc. traded lower Friday, playing off a wider-than-expected third-quarter loss tied in part to a $120 million charge taken for its acquisition of ATI Technologies.

The shares were off more than 5% at their worst levels in morning action, down lately by 74 cents to $13.81.

Analysts said the Sunnyvale, Calif.-based chipmaker AMD  got a boost from strong consumer demand for personal computers, particularly notebooks.

But they also said AMD continues to face stiff competition from archrival Intel Corp. in the server market, and it's still struggling to keep costs under control.

"While we believe these results represent a nice recovery quarter and reaffirm the sustained strength in overall PC demand trends, we believe that the company still has a challenging road ahead both on [the] competitive technology front as well as a near-term return to profitability," analysts at Cowen & Co. said in a research note Friday.

Cowen's analysts also pointed out that AMD appears to have lost some market share to Intel in servers but that "some of these share losses could be stemmed in [the fourth quarter] as AMD ramps production of its quad core platform."

Cowen maintained a neutral rating on AMD's shares.

Meanwhile, analyst Robert Burleson of ThinkEquity Partners offered a more upbeat analysis, noting AMD's "very robust sequential notebook unit growth" and "a rebound in graphics, which we believe will accelerate" in the fourth quarter.

ThinkEquity Partners reiterated its buy rating on AMD.

The company said it lost $396 million on revenue of $1.63 billion in the three months ended Sept. 29. This compares to a profit of $136 million on revenue of $1.33 billion in year-earlier third quarter.

The company reported a loss per share of 71 cents, compared to a profit of 27 cents a share in the same quarter last year. But the company said the ATI-related charges totaled 22 cents a share. AMD acquired ATI, one of the world's top makers of computer graphic cards, last year.

Analysts had expected AMD to post a loss of 62 cents per share on revenue of $1.52 billion, according to Thomson Financial.