Intel net rises, margins hold up; shares climb

By Eric Auchard and David Lawsky

SAN FRANCISCO (Reuters) - Technology bellwether Intel Corp (INTC.O) reported a 12 percent rise in quarterly profit and said year-end revenue could be lighter than expected amid uncertain demand, but the outlook was better than feared, sending shares higher.

The world's biggest computer chipmaker said on Tuesday it expects revenue in the fourth quarter of $10.1 billion to $10.9 billion. The midpoint of that range, $10.5 billion, was a little over 2 percentage points lower than Wall Street hopes.

"These are numbers that if you have to be somewhere with a slower future, this may not be a bad place to be," said Mike Holland, fund manager at Holland & Co., which oversees assets in excess of $4 billion, including Intel, IBM and Apple.

"For me, this is a relief rally more than anything else," said Sean Conner, senior equity analyst, First American Funds in Minneapolis.

Intel's shares were up 4.5 percent at $16.65 in extended trade as analysts and investors said the lowered outlook was better than many had hoped against the backdrop of a global financial crisis. Shares closed down 6.2 percent ahead of the report in regular session trading on Nasdaq on fears it would do worse.

"The company's executing very well, and the signal regarding the rest of the industry is there does seem to be slowdown but it's not catastrophic," said Hans Mosesmann, an analyst with Raymond James in New York.

Altera Corp (ALTR.O), which makes programmable chips, also said third-quarter profit climbed 37 percent, topping Wall Street targets and pushed its shares up nearly 6 percent.

But Linear Technology Corp (LLTC.O) said its second-quarter revenue would fall 10 to 20 percent from the prior quarter due to a decline in orders and softness in the industry, sending its shares down 11 percent.

FINANCIAL CRISIS IMPACT UNCLEAR

Santa Clara, California-based Intel said the average selling price for its microprocessors dipped as sales increased of its lower margin Atom processor for use in new mobile computers that are smaller than conventional notebooks. It said it generated $200 million in revenue from Atom chip sales.

"As we look to Q4, it is hard to know what impact the financial crisis will have on end customer demand," Chief Executive Paul Otellini said in a statement. He added that he was confident in his company's ability to outpace competitors "at a time when business levels are difficult to predict."

Third-quarter net income rose to $2.01 billion, or 35 cents per share, from $1.86 billion, or 31 cents per share, in the year-ago quarter. Revenue rose 1 percent to $10.2 billion.

Wall Street had been looking for a third-quarter profit, on average, of 34 cents per share, according to Reuters Estimates.

The company, which is the industry's biggest investor in the next generation of chip production equipment, trimmed its capital spending plans modestly for 2008 to $5 billion, plus or minus $100 million, from $5.2 billion previously.

The Santa Clara, California-based company said it benefited from a lower tax rate around 29 percent, below the 33 percent it had expected to pay during the third quarter.