Intel's upbeat forecast fails to swing sentiment

A sign is shown at the entrance to the headquarters of Intel Corporation in Santa Clara, California February 2, 2010.

SAN FRANCISCO (Reuters) - Chipmaker Intel Corp's expectations for stronger sales met with skepticism ahead of rival AMD's quarterly report and failed to invigorate sentiment as investors worried about weak consumer demand for computers.

Since Intel cut its sales forecast last August, technology stocks have rallied on expectations things can only get better. But the Santa Clara, California-based company's shares lost ground on Wednesday, a day after its earnings report.

While Intel's upbeat forecast raised hopes the technology sector could end 2010 on a strong note, it was not deemed enough to push share prices in the sector to a whole new level.

Smaller rival Advanced Micro Devices Inc reports quarterly results on Thursday, but its end-of-year guidance is unlikely to shift sentiment about the sector, which has been dogged by the sluggish economy and a buildup in inventories.

"This group needs direction and right now people haven't believed the numbers for several quarters," said Oppenheimer analyst Rick Schafer. "To have Intel go out there with rose-colored glasses ... well, they were giving a best-case scenario."

After gaining 12 percent since the end of August, shares of Intel, whose microprocessors are in 80 percent of the world's personal computers, fell 2.68 percent to $19.24 on Wednesday. AMD was down 1.1 percent at $7.22.

Intel said its revenues would likely rise 3 percent in the fourth quarter, better than expected, but still less than in a typical holiday quarter.

After Intel warned in August that weak consumer demand was hurting its PC microchip business, executives said on Tuesday that sales picked up a bit and they now expect the improvement to continue, with strength in enterprise and emerging markets.

But some analysts cautioned that good news in September might not carry through to the rest of the year.

"It's clear the industry itself is in an inventory correction. If Intel's numbers are taken at face value this would be mildest correction in at least the last 15 years," said Arnab Chanda, an analyst at Roth Capital Partners.

AMD's revenues are expected to grow 3 percent sequentially in the final quarter of 2010 after falling about 2 percent in the third quarter, according to Thomson Reuters I/B/E/S.

(Reporting by Noel Randewich; editing by Andre Grenon)