Intel results trump expectations

By Alexei Oreskovic

SAN FRANCISCO (Reuters) - Intel's (INTC.O) quarterly results and outlook blew past Wall Street forecasts on better-than-expected consumer demand for PCs, especially in Asia, setting an auspicious tone for the technology sector.

Shares of Intel, the world's largest chipmaker, jumped 8 percent on the report, driving Standard & Poor's 500 stock index futures sharply higher and bolstering technology shares such as arch rival Advanced Micro Devices (AMD.N).

Intel projected third-quarter revenue at $8.1 billion (4.96 billion pounds) to $8.9 billion, compared with analysts' average forecast of $7.8 billion, according to Reuters Estimates.

CFO Stacy Smith said fourth-quarter gross margins could scale the high end of a "normal" range -- which Intel defines as 50 to 60 percent -- due partly to declining production costs for new generations of chips and other factors.

Intel's strong showing came despite what it described as weak demand from the corporations that traditionally are big buyers of computer equipment, and comments by Intel executives that Microsoft's (MSFT.O) forthcoming Windows 7 operating system is unlikely to revive corporate spending this year.

"You have an $8 billion quarter with very little enterprise spending taking place," said Broadpoint Amtech analyst Doug Freedman. "The consumer is healthier than we expected."

Excluding charges for a European antitrust fine, Intel said it earned 18 cents a share in the second quarter, beating the average forecast of 8 cents according to Reuters Estimates.

Revenue in the three months ended June 27 was $8 billion, down 15 percent year-over-year, but well above the average $7.27 billion expected by analysts.