Intel beats low 3Q expectations

Intel (Nasdaq: INTC) topped analysts' downwardly revised estimates and edged past its own lowered revenue expectation in the third quarter, and predicted fourth quarter sales would rise 4 to 8 percent sequentially.

After market close Tuesday, the world's largest maker of PC processors reported third quarter net income of $2.9 billion, or 41 cents per share, excluding special charges. First Call's latest survey of 24 analysts predicted a profit of 38 cents per share for the quarter ended Sept. 30.

Higher-than-expected investment gains of $966 million helped Intel top estimates. The company previously anticipated $900 million in investment income.

Including $428 million in acquisition-related expenses, Intel earned $2.5 billion, or 36 cents per share.

Shares of Intel traded at 36.875 in afterhours activity on the Island electronic communications network, immediately following the release of quarterly results. Intel stock closed Tuesday's regular trading at 36.1875, up 0.5 for the session.

Also Tuesday, Intel said it sees fourth quarter revenue rising between 4 and 8 percent from the third quarter. Fourth quarter gross margin is expected to be 63 percent, down from the third quarter's 64 percent, as Intel shifts more fabs to manufacturing at 0.18 micron sizes.

Non-operating income in the fourth quarter should be about $950 million, said the company, which also anticipates $440 million in fourth quarter amortization expenses.

Third quarter revenue of $8.7 billion was slightly ahead of the $8.5 billion predicted by Intel in a warning last month, when the company blamed slow PC sales in Europe for hurting revenue. Company executives again cited European problems on Tuesday.

"We anticipate record revenue in the fourth quarter, with growth across most of our product lines," CEO Craig Barrett said. "We are especially pleased with the rapid growth in our server business, our record flash business, and our networking silicon business which surpassed our expectations in the third quarter."

Microprocessor shipments were flat sequentially, Intel said, although chipset and motherboard shipments rose. The average selling price of PC processors was about the same as the second quarter, the company said.

Intel spent $1 billion to buy back 14.3 million shares during the third quarter.

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