Intel reports 17% increase in sales

"We're starting to see more going on in software, computers and servers, but not as much yet in the commu-nications areas."

Jessica Caie, a manager at Cohen, Klingenstein & Marks

Intel Corp said third-quarter sales will rise at least 17 percent, marking the second time in two weeks the company raised estimates in a sign personal-computer demand may be improving.

Sales will rise to US$7.6 billion to US$7.8 billion from a year earlier, Intel said in a statement. The Santa Clara, California-based company projected US$7.3 billion to US$7.8 billion on Aug. 22, raising it from a previous high of US$7.5 billion.

Intel, the world's biggest semiconductor maker, joins a growing number of computer-related companies indicating business is starting to improve. Advanced Micro Devices Inc, Intel's biggest rival chipmaker, yesterday said July and August chip sales exceeded its expectations. Best Buy Co, the largest US electronics retailer, yesterday said PC sales in the quarter ended last month were higher than it expected.

"You've got robust consumer spending on PCs, there's no doubt about that," said Rob Siewert, a chip analyst at Victory Capital Management, which manages US$65 billion and owns Intel shares. "That and Asia rebounding are the two biggest portions" contributing to the improved outlook.

Intel is seeing "strong, broad-based" demand for processors and other PC products, especially in "emerging markets," according to the statement. The chipmaker said third-quarter gross margin, or the portion of sales left after paying manufacturing costs, will be 54 percent to 58 percent of the range it forecast last month.

Chipmakers showing improved sales include National Semiconductor Corp. The Santa Clara, California-based maker of chips used in mobile phones today reported its first-quarter net income surged more than 20-fold to US$29.7 million. Sales rose 1 percent to US$424.8 million and will rise at last 4 percent this quarter from last, beating average analyst estimates.

Sales of communications gear, which includes products such as network processors, remains "soft," Intel said. Its communications group had an operating loss of US$622 million on declining sales of US$2.08 billion in last year.

The company is pouring money into the group in hopes it will compensate for what analysts say is slowing long-term demand for Intel's flagship computer products.

"We're starting to see more going on in software, computers and servers, but not as much yet in the communications areas," said Jessica Caie, who helps manage US$2 billion at Cohen, Klingenstein & Marks, which owns Intel shares. "They've put a lot of money into it and it hasn't paid off yet."

Intel's total sales were US$6.5 billion in the third quarter of last year.