"Suffer the dreams of a world gone mad --
I like it like that and I know it!"

-- "Leave," by R.E.M., from New Adventures in Hi-Fi, 1996

There were very few surprises in last night's earnings report from Advanced Micro Devices (NYSE: AMD). We already knew that first-quarter revenue would fall right around $1.5 billion, and you could tell from a mile away that there would be a net loss in the company's pockets. The final tab stopped at $358 million below breakeven, or a $0.59 loss per share.

Even the reasons for the lowered sales bar were unsurprising, to the point of drab cliche. "A seasonally weak first quarter was amplified by a challenging economic environment for consumers and lower than expected revenues of previous generation products," said CFO Bob Rivet. That's bad news across every product line and end customer.

The good news is that the losses were smaller than the $1.11 loss per share a year ago, or the $3.06 per-share pain of last quarter. Management says that AMD should return to profitability in the third quarter, which would be the first profits seen since the halcyon days of October 2006.

In other positive updates, Rivet said that the balance sheet is in good enough shape to see the company through the restructuring charges and other losses that are expected to come before the return to operational health. Last year's price wars with Intel (Nasdaq: INTC) on the processor side and NVIDIA (Nasdaq: NVDA) in the graphics chip market left some lasting scars on this eternal underdog but did not put the company out of business.

Let's press on with the cheerful cavalcade: Bug-free quad-core processors are now shipping in serious volume, which bodes well for future gross margins. Even better, the 45-nanometer manufacturing process is on track for "mature yields" and production-level shipments in the fourth quarter.

It's about time for AMD to get that baby out the door, especially since Intel has already been enjoying the cost-controlling and low-power benefits of the more advanced process for several quarters now. AMD simply can't afford to fall too far behind in the process race.

Because management expects profits before letting 45nm processors out the door, I'm thinking that the fourth quarter in particular should be cheerful indeed -- if AMD can deliver on that road map. Until then, this stock is a classic value play that trades at just a little over 50% of its expected forward revenue; Intel is going for around 3 times forward sales. Yes, Intel is the better performer right now, but not by that wide a margin.

Further Foolishness:

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Fool contributor Anders Bylund is an AMD shareholder but holds no position in any other companies discussed here. You can check out Anders' holdings if you like, and Foolish disclosure has the patience of a comatose angel.