Swiss third seed Roger Federer's Rome Masters bid ended with a 7-6 (7-2), 6-4 third round defeat to Austrian 13th seed Dominic Thiem Thursday. Federer, who withdrew last week from Madrid with back pain, admitted Wednesday he had been surprised to get past second round opponent Alexander Zverev in straight sets. Spain's Rafael Nadal set up a likely quarterfinal clash with defending champion Novak Djokovic at the Rome Masters Thursday after battling past Australian upstart Nick Kyrgios 6-7 (3-7), 6-2, 6-4 in the third round. Swiss Stanislas Wawrinka was ousted by Argentina's Juan Monaco 7-6 (7-5), 6-3, 6-3. Rome marks only the fourth tournament of the season for Federer, who underwent knee surgery in early February, the first operation of his career. The 17-time Grand Slam champion only decided to face Thiem at the last minute on Central Court, and the Austrian capitalized to finish off an obviously ailing Federer in 1hr 18mins. In the quarterfinals, Thiem will now play Japan's sixth seed Kei Nishikori, who beat French 11th seed Richard Gasquet 6-1, 6-4. Federer admitted he was happy to exit the tournament, which he has never won, because it will give him time to consider his options as he tries to regain full fitness ahead of next month's French Open at Roland Garros. He said he will now consult his team about whether to remain in Italy, travel to France or return home to Switzerland. Federer said his outlook has all changed in the "last couple of weeks" and added: "The way I'm playing right now is not going to be good enough for a good run in Paris. "It really depends now on the next seven to nine days, how I can really play in Paris. I'm going to have a meeting with my team, talk about options we have, stay in Rome, Paris or go back to Switzerland." be the beginning of a Rome Masters fairytale for 22-year-old Austrian Thiem, who is approaching 30 wins for the season having secured two titles already and suffered defeat to Germany's Philipp Kohlschreiber in the final at Munich nearly a fortnight ago. In the women's tournament, top-ranked Serena Williams came back from 3-5 down in the opening set and saved a set point in the tiebreak of a 7-6 (7), 6-1 win over American qualifier Christina McHale. Williams' quarterfinal opponent will be ninth-seeded Svetlana Kuznetsova, who beat Daria Gavrilova 6-2, 2-6, 6-3. Also, 11th-seeded Timea Bacsinszky beat eighth-seeded Carla Suarez-Navarro 5-7, 7-5, 6-2, and Irina-Camelia Begu defeated Daria Kasatkins 6-1, 6-4. On Wednesday, Rafael Nadal continued his recent good form, beating Philipp Kohlschreiber 6-3, 6-3. Australian Nick Kyrgios picked up another big win in an excellent season so far, putting out tenth seed Milos Raonic 7-6 (7-5), 6-3. French 11th seed Richard Gasquet beat Andreas Seppi 6-3, 6-4. In women's second-round play, Australian Daria Gavrilova dispatched Madrid champion Simona Halep, seeded sixth, 6-3, 4-6, 6-3. American Madison Keys knocked out fifth seed and two-time quarterfinalist Petra Kvitova 6-3, 6-4, while Misaki Doi saw off French Open finalist Lucie Safarova 6-3, 7-5. American 7-time major winner Venus Williams bowed out after a marathon defeat to Timea Babos that lasted nearly three hours. — Agencies