Just when Advanced Micro Devices (NYSE: AMD) looked ready for last rites, the processor designer slapped away the coroner's hand with an angry, "I'm not dead yet!"

The stock took a deep plunge a month ago as management lowered revenue guidance. On Thursday, AMD followed up with actual sales at the lower end of the new target range and investors greeted the news with confetti and streamers. Share prices jumped as much as 13%, coming within 7% of repairing the damage from that fateful guidance update.

There are some details to get genuinely excited about in this report:

  • The server chip division saw sales rising 27% over the seasonally challenged second quarter.
  • Graphics revenue jumped 10% quarter over quarter while segment profits more than doubled. AMD is beating NVIDIA (Nasdaq: NVDA) black-and-blue in the market for add-in graphics cards; NVIDIA saw sequentially flat graphics cards sales in its most recent quarter.
  • Management claims to be taking notebook market share from Intel (Nasdaq: INTC) with a 35% sales boost.

But those strong segments were overshadowed by a radically weak desktop division as manufacturing problems with the newest and most advanced chips took their toll in this area. AMD says that demand for those factory-constrained chips is high and that sales should start rolling once GLOBALFOUNDRIES gets everything back on schedule.

But early reviews of the so-called Bulldozer architecture haven't been kind. I can't imagine this disappointing product line, which reminds me a lot of Intel's failed and euthanized Pentium 4 strategy, making a difference in high volume.

Meanwhile, both MIPS Technologies (Nasdaq: MIPS) and ARM (Nasdaq: ARMH) are busy rolling out power-sipping server products of their own. ARM already owns the mobile space thanks to a stable of super-successful partners ranging from Samsung and Marvell Technology (Nasdaq: MRVL) to Apple (Nasdaq: AAPL) and its in-house chip design efforts. These guys will invade the data center long before AMD or Intel move into our pockets and purses.

I used to insist that AMD was worth about $10 a share. Today's market action might point in that direction. Don't jump to any hasty, blue-eyed conclusions: That $10 target assumed that the Bulldozer architecture would be ready to flatten the data center while other chips made an unstoppable move into notebooks and netbooks.

Only half of that thesis is on track today, and that's not good enough. Today's $6 price looks just about right -- but only if you believe that AMD will continue to win inches and feet of battleground in the portable arena. If not, the stock is too expensive right now.

Will AMD fly or flop from here? You've seen my theories, but the only way to know for sure is to keep an eye on the company. Our Foolish watchlist feature can help you do just that. In a single click, you can set up access to a steady stream of news and Foolish analysis on AMD, Intel, or any stock you like. Just click here to get started.