Sales from AMDs Computation Products Group increased by 21 percent, improving gross margins within AMDs memory division, AMD chief financial officer Robert Rivet said in a statement. AMDs 64-bit processor sales represented more than one-third of the companys total CPG sales, and sales growth was driven by both higher average selling prices and increased unit volumes, he said. In previous quarters, AMD revenues had been driven by sales of memory devices, especially flash. During the third quarter, AMDs processor division found its footing.Read more here about AMDs earnings in the second quarter.Sales at AMDs CPG increased to $673 million from $503 million in the third quarter of 2003 and $554 million in the second quarter of 2004, an increase of 34 percent and 21 percent, respectively. AMDs Memory Group recorded $538 million in the third quarter, an increase of 27 percent from $424 million in the third quarter of 2003 and a decline of 20 percent from $673 million in the second quarter of 2004. Balanced against the AMD64 products will be the new Sempron, which was launched this past quarter. Although the Sempron was not designed to replace the AthlonXP, the chip will serve some of the same markets. Designed for "everyday computing," the Sempron is seen as AMDs processor of choice for the emerging Chinese market. There, the chip will go up against a non-Intel MIPS RISC processor, which will power an "Open Sourced Network Computer" initiative announced Wednesday by a Chinas Tsinghua University, MIPS Technologies Inc. and ATI Technologies Inc. The PMC Xiao Hu will be based on PMC-Sierras MIPS-based core, said Bob Bailey, chief executive of Santa Clara, Calif.-based PMC-Sierra, who argued that the oft-maligned NC (network computer) could survive under the right conditions. "The reason the NC initiative will likely succeed now when it has failed in the past is because of a confluence of events and trends, such as Linux open source, open-source hardware from the MIPS community, and Moores Law catching up to the idea, so that the cost of a thin client will be dramatically cheaper than a PC as well as draw less than a tenth of the power," Bailey wrote in an e-mail to eWEEK.com Wednesday night. In addition, the emerging economies in Asia and Eastern Europe are screaming for the low-cost thin-client/server model, Bailey said. Although memory sales decreased, AMD executives said they werent worried. Ruiz said he visited many of the Asian handset OEMs during the last weeks of the quarter, and they reported that an unsettled Chinese market caused them to be cautious. Meanwhile, AMD is shifting its own fab and the one it shares with joint-venture FASL LLC to 110-nm lines, the most advanced in the industry. "Well see some pickup [in the second half of 2004] for these reason s," Ruiz said. "If the market is there and the supply-chain logistics are fixed, well do well." Click here to read about Hewlett-Packards supply-chain woes. AMD expects third-quarter revenues to be in line with seasonal norms, which typically show revenue increases of about 10 percent to 12 percent, Ruiz said. The flash memory market will continue to be "challenging," but the company will be helped by a continued shift toward its AMD64 line and away from the 32-bit generation, executives said. Editors Note: This story was updated to include information and comments from a conference call with AMD officials and analysts. Check out eWEEK.coms Infrastructure Center at http://infrastructure.eweek.com for the latest news, views and analysis on servers, switches and networking protocols for the enterprise and small businesses.