Intel ups revenue expectations

Despite suffering through difficult second and third quarters, Intel on Thursday said that revenue for the fourth quarter is likely to fall somewhere between $6.8bn and $7bn - somewhat higher than its original projection for the quarter - due to strong demand for PC processors and for flash memory, a key component in cell phones.

So far this quarter, Intel's communications chips have seen an anticipated uptick in sales while the chipmaker's Intel Architecture business, which includes PC processors and chipsets, has been performing above expectations.

This trend doesn't necessarily reflect a major shift in either consumer or business buying. Instead it reflects what's shaping up to be a more average quarter. Consumer sales have stayed strong instead of falling off as Intel feared they might, when it issued its original guidance for the quarter in October, said CFO Andy Bryant on a conference call with analysts and reporters.

"What we think we're seeing is pretty much a seasonal fourth quarter," Bryant said. "We were concerned about whether consumers would continue buying. There's been some business buying, but pretty much as expected. I don't think we're seeing anything unusual anyplace other than that things are a little better than we expected."

The company said in October that it expected revenue for the fourth quarter to come to between $6.5bn and $6.9bn, or flat to six per cent higher than the third quarter, a relatively gloomy outlook. Typically, revenue rises six per cent to 12 per cent from the third to the fourth quarter because of the holiday shopping season and budget blowouts by government agencies and businesses.

Before Intel's update, analysts estimated that the chip giant would achieve revenues of $6.7bn and earnings per share of 13 cents for the quarter, according to First Call.

While the United States and Europe are performing up to expectations, processor sales in Asia have been better than anticipated.

"We see that mature markets are performing about as expected, and we see stronger-than-expected revenues in Asia-Pacific and Japan - both local consumption and product shipped back to mature markets" like the United States or Europe, Bryant said.

Bryant would not comment on Intel's sales mix, the percentage of Pentium 4 chips its sells versus its less costly Celeron processors.

Other companies have recently reported that sales will be stronger than earlier, pessimistic forecasts, due to an upturn that seemingly began in October.

Earlier on Thursday, Intel rival Advanced Micro Devices said it expects revenue for its fourth quarter to total about $700m, a 35 per cent increase from its third-quarter revenue of $508m. AMD originally forecast a fourth-quarter increase of about 20 per cent.

Hewlett-Packard and Emachines, meanwhile, said they were pleased with the early holiday sales results, although Gateway warned that, unless it sees a significant acceleration in sales, it may have to lower its estimates.

Michael Kanellos writes for News.com. News.com's John G. Spooner contributed to this report