Intel Shares Rise as Profit Beats Expectations

Technology bellwether Intel posted a 12 percent rise in third-quarter profit and said current quarter revenue could come in lighter than expected amid uncertain demand, but the outlook was better than feared, sending its 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. Analysts were looking for revenue between $10.4 billion and $11.18 billion, according to Reuters Estimates.

"For me, this is a relief rally more than anything else," said Sean Conner, senior equity analyst, First American Funds in Minneapolis. "The bottom line is that they did better than expected. Gross margins came in better than people were expecting, for both this quarter and in its outlook for the fourth quarter."

Shares of Intel leaped more than 4 percent in late trading after closing Tuesday's regular market hours down 6.24 percent at $15.93.

"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."

(Accompanying Video: Intel Chief Financial Officer Stacey Smith talks with CNBC's Jim Goldman about Tuesday's earnings report. Intel's revenue range for the fourth quarter is far wider than what it has offered in the past, and that suggests a degree of uncertainty about what the company anticipates. By and large, however, Smith remains optimistic about Intel's opportunities.)

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.

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Analysts had expected revenue, on average, to rise 1.6 percent to $10.25 billion, according to Reuters Estimates. The range of forecasts had varied from flat growth to 4 percent.

Paul Sakuma / AP

Gross margin jumped to 58.9 percent from 55.4 in the second quarter ended in June. Intel said its ability to cut microprocessor production costs as microprocessor revenue rose helped margins, even as demand shifted toward lower margin chips used in a new class of small computers called netbooks.

Intel shares have fallen 32 percent since the start of the start of the third quarter in July. Semiconductor stocks are notoriously volatile because of the industry's big swings and the high costs associated with manufacturing chips.

- CNBC staff contributed to this report.

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