AMD’s total microprocessor unit shipments rose 18% sequentially during the third quarter, proving that while the industry’s brutal price wars in recent months have abated, AMD continues to hang tough against the world’s largest chipmaker.

The real battle was won in the notebook market where AMD saw revenue and unit shipments rise more than 50% from the previous quarter, said chief executive Hector Ruiz, on a conference call. Clearly, AMD gained some more share in that segment, despite Intel posting a record quarter for mobile shipments.

The day before, Intel claimed, on its own quarterly earnings call, that it had gained share in the server market. Ruiz rebuffed this: We believe we did not lose share in the server space, he said, but admitted AMD did not see double-digit sequential growth in the quarter.

Intel also reported a 35% drop in profit, despite surpassing Wall Street’s estimates.

However, AMD’s share gains came at the expense of profit margins, which fell to 51.4% from 56.8% in the previous quarter.

This was particularly evident in its desktop sales, which were flat sequentially despite higher unit shipments.

When an analyst on the call asked whether the company would continue to seek market share over margins, Ruiz replied, I don’t think we look at our business from that point of view.

AMD chief operating officer Dirk Meyer said later in the call, Our goal is to live in that zone of 55 to 60% [profit margins] for the microprocessor business.

There also was talk from the executives of profit margins popping back during the current quarter.

This didn’t seem enough for Wall Street, which sent AMD shares down 9% to $22.05 in after-hours trading on the Nasdaq, following AMD’s earnings announcement.

Ruiz said AMD was on track to grow total unit shipments 35% in 2006 and hopes to do the same next year.

For the recent quarter, AMD reported a profit of $134.5mn, or 27 cents a share, compared with $76mn, or 18 cents, a year ago.

Revenue was down nearly 13% to $1.33bn, following the spin off its Spansion Inc memory business last year. Excluding Spansion revenues, AMD’s sales would have risen 32%.

Wall Street analysts had hoped for an average of $1.3bn with 24 cents earnings per share, according to Thomson Financial.

Sunnyvale, California-based AMD and Santa Clara, California-based Intel have engaged in bloody pricing wars, particularly in the desktop market, for the past 18 months.

Intel chief executive Paul Otellini said earlier this week that pricing pressure had eased during the past quarter and AMD agreed.