Aug. 28--In another indication the tech sector and overall economy are emerging from the worldwide recession, Santa Clara semiconductor giant Intel on Friday raised its third-quarter sales forecast, citing "stronger-than-expected demand" for its chips.

The company, which is widely regarded as a barometer for the tech industry as a whole, said it expects sales for the third quarter to be $8.8 billion to $9.2 billion.

On July 14, when Intel reported its second-quarter earnings, it predicted third-quarter sales of $8.1 billion to $8.9 billion.

Analysts surveyed before Friday by Thomson Reuters were expecting $8.55 billion in revenue.

Intel, the world's biggest chip maker and the dominant supplier of the brainy microprocessors used in personal computers, also said it expects the quarter's gross profit margin to be in the upper half of the range it previously forecast. It cautioned, though, that unanticipated business conditions may alter its prospects.

The news sent Intel's shares up 78 cents, or 4 percent, to $20.25 at the close of trading.

FBR Capital Markets analyst Craig Berger said in a note to his clients that Intel's revised forecast reinforces what he and other analysts have been noting for months: Demand for chips used in PCs and other products is perking up.

However, Berger voiced a concern expressed by other Wall Street observers that Intel could face problems, in part because of its low-priced Atom microprocessor.

Intel has had success getting Atom into most of the "netbooks" on the market and hopes to expand the chip's use in many other products, including smart-phones. However, Berger and some other analysts worry that sales of Atom may eat into sales of Intel's more powerful and more expensive microprocessors, which could hurt the company's bottom line.

In addition, Berger noted that Intel faces stiff competition getting its chips into smart-phones, noting "we do not think Intel has any particular advantages here."

But Edwin Mok, an analyst with Needham & Co., wrote his clients that Intel's prospects look rosy well into 2010 because of increasing demand for its chips in notebooks and servers.

Mok said Intel's bottom line is benefiting from a change in marketing. In the past, Intel had aggressively cut prices to compete with Advanced Micro Devices. "This year, however, Intel has taken a different strategy and limited price cuts," he said.

Contact Steve Johnson at 408-920-5043

-----

To see more of the San Jose Mercury News, or to subscribe to the newspaper, go to http://www.mercurynews.com.

Copyright (c) 2009, San Jose Mercury News, Calif.

Distributed by McClatchy-Tribune Information Services.

For reprints, email tmsreprints@permissionsgroup.com, call 800-374-7985 or 847-635-6550, send a fax to 847-635-6968, or write to The Permissions Group Inc., 1247 Milwaukee Ave., Suite 303, Glenview, IL 60025, USA.

INTC, AMD,

A service of YellowBrix, Inc.