UPDATE 3-Intel trumps forecasts, bodes well for PC sector

* Q2 earnings, revenue beat Wall Street expectations

* Q3 revenue, gross margin forecasts also top estimates

* Says consumer PC demand improving, corporate still weak

* Intel shares jump 8 percent, drives up S&P futures (Adds more details from report, investor comment)

By Alexei Oreskovic

SAN FRANCISCO, July 14 (Reuters) - Intel Corp'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 SPc1 sharply higher and bolstering technology shares such as arch rival Advanced Micro Devices Inc (AMD.N).

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

"They guided gross margins for the third quarter of 53 percent and the whisper was 50 percent to 51 percent. A nice way to kick off earnings season for tech companies," said Patrick Wang, an analyst at Wedbush Morgan.

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 ending June 27 was $8 billion, down 15 percent year-over-year, but well above the average forecast of $7.27 billion expected by analysts.

Chief Financial Officer Stacy Smith told Reuters that computer markets were strengthening and there were "pockets of relative strength" in consumer PC markets, as well as in the Asia Pacific region and in China.

But Smith noted that the corporate market remains weak and said Intel does not expect much of a change in the second half of the year.

The company forecast third-quarter gross margin at 53 percent, plus or minus 2 percentage points, an improvement from the second quarter's 51 percent.

TECH SHARES UP

Intel's microprocessors are used in more than three-quarters of the world's personal computers, so its results are a barometer for the global PC sector.

"This bodes well for the sector, which many believe looks inexpensive," said Steve Neimeth, a portfolio manager at SunAmerica Mutual fund. "It bodes well for many of the large-cap tech companies like IBM (IBM.N), Microsoft (MSFT.O) and Cisco (CSCO.O), which have correlation due to similarities in their end market."

Shares of smaller Intel rival AMD were up 4 percent in extended trading, while Microsoft shares climbed 3 percent, Cisco gained 2 percent and IBM rose 1 percent.

Intel has felt the effects of the economic recession and the slowdown in IT spending, though Chief Executive Paul Otellini said in April that PC sales had "bottomed out" in the first quarter and that the industry was returning to seasonal business patterns.

The chipmaker posted a net loss of $398 million, or 7 cents a share, for the second quarter, after taking charges related to a $1.45 billion fine imposed by European regulators, which ruled in May that Intel abused its market position to squeeze out AMD. Intel has said it intends to appeal the ruling.

This time last year, Intel earned $1.6 billion in net income, or 28 cents a share.

Sales of microprocessors for laptop PCs rose 16.7 percent sequentially, while revenue from Intel's Atom processors and chipsets, designed for inexpensive netbook PCs, soared 65 percent from the first quarter to $362 million.

Unit shipments of microprocessors increased from the first quarter, though the average selling price declined sequentially, Intel said.

Intel had stopped providing official guidance in January, limiting its comments to internal revenue targets. Smith said the resumption of guidance was a sign that visibility had improved as order rates become more predictable.

"Intel has a much stronger seasonal second half. So the fact that Q2 is better than Q1 clearly puts the worst behind Intel," said Doug Freedman, analyst at Broadpoint Amtech.

Shares of Intel were trading at $18.06 after hours, compared to their Nasdaq close of $16.83. The shares have risen roughly 38 percent since bottoming out at a 52-week low of $12.05 in early February.

(Reporting by Alexei Oreskovic; Additional reporting by Ritsuko Ando, Laura Isensee, Edward Krudy and Sue Zeidler; Editing by Tiffany Wu and Richard Chang)