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Intel's revenue outlook stable

The chipmaker says revenue for the first quarter will come to between $6.6 billion and $6.9 billion, within the range of its earlier prediction of $6.4 billion to $7 billion.

Intel narrowed its revenue forecast for the first quarter Thursday, although it doesn't appear that the economy or the chip business is turning around yet.

The Santa Clara, Calif.-based chipmaker said that revenue for the first quarter would come to between $6.6 billion and $6.9 billion, within the range of its earlier prediction of $6.4 billion to $7 billion. Gross margins are expected to come in around 50 percent, give or take a few points, although the company indicated that the final figure could come in above 50 percent.

Microprocessor sales will follow a seasonal pattern, the company added, meaning sales will slightly dip. Meanwhile, the company's communications businesses remain weak.

The biggest surprise for the quarter is that server sales are going better than anticipated, said Andy Bryant, the company's chief financial officer. Manufacturing costs have also declined slightly more than expected during the quarter. Nonetheless, the economic outlook remains flat, he said.

"We've seen no evidence of an economic recovery in our business," Bryant said.

Intel will officially publish its financial results for the quarter April 16.

The predictions were largely in line with previous statements. Intel CEO Craig Barrett said last week at the Intel Developer Forum in San Francisco that the market had begun to once again show signs of life.

"I can't tell you when the recession will end, but I can tell you that the computer market has stabilized, albeit at a lower level than last year," Barrett said at the four-day convention used to highlight the chipmaker's technological advances. "You might expect the computer sector to recover faster than the communications sector."

Still, the big question going forward is when corporate buying will resume. U.S. corporations typically buy replacement PCs every three years. The last large upgrade cycle took place in 1998 and early 1999, so one is theoretically on the way. The economy, though, combined with the fact that many workers may not need more power on their desktops just yet, has stalled the latest cycle, analysts have said.

"It doesn't seem to be changing (the buying cycle), at least right now," Bryant said. Desktops aside, he added that the pickup in the server business could be coming at the expense of companies that manufacture servers with RISC chips, such as Sun Microsystems. Sun, though, on Thursday said that its guidance for the quarter remains unchanged.

"After four quarters of economic stress, the price/performance of the Intel architecture begins to resonate with people," Bryant said. "The server business is growing a little faster than we expected it to at the beginning of the quarter."