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Intel raises revenue outlook, shares rise

Intel Corp raised its outlook for third-quarter revenue on stronger-than-expected demand for its microprocessors and chipsets, offering the latest signal that spending on computers is on the upswing.

Shares of the world's largest chipmaker jumped as much as 6%, making it the top percentage gainer in the Dow Jones Industrial Average, after it revised a forecast it had issued just last month.

Third quarter revenue, it said, is now likely to run between $8.8 billion and $9.2 billion, up from the earlier outlook of $8.1 billion to $8.9 billion. Gross margins, meanwhile, should be in the upper half of its previous range.

Intel's microprocessors are used in more than three-quarters of the world's personal computers, so its results are seen as a barometer for the global PC sector. Combined with better-than-expected earnings on Thursday from Dell Inc, Intel's new forecast suggests that consumer demand is rebounding.

What is more, the strongest stretch of the third quarter usually comes in the final weeks, said Arnab Chanda, an analyst at Roth Capital Partners. “So the fact that Intel's preannouncing positively in the third quarter before the last month, that's actually a very good sign for business in the PC industry.”

To be sure, optimism for the technology sector may be dampened by a lingering reluctance by corporations to spend on new systems. Last week, Hewlett-Packard Co posted slightly better than expected third-quarter results but expressed caution about business demand, an area of concern also for Dell, whose enterprise units continue to struggle.

“I think this is really great news for the overall PC industry,” said Carlos Guillen, analyst at Wall Street Strategies. “Dell (results) showed signs that the consumer was picking up its spending. Overall, corporate is down and it is a large portion of their revenue. But the consumer continued to increase purchases, which was definitely a good sign.”

While Intel raised the midpoint of its revenue forecast by about 5.8%, and narrowed the range, its most optimistic view still falls short of the $10.2 billion in revenue it reported for the same period one year ago.

Still, much of the tech sector received a lift from Intel's forecast, which also stated that gross margin would be in the upper half of its previous 51 to 55% range. (Reuters)