Intel Hikes Revenue Outlook, Cites Notebook Demand

Intel Corp. (INTC), the world's largest chip maker, Thursday raised its revenue forecast for the second quarter, citing strong demand for its Centrino notebook computer chips.

But Intel shares, which rose 2 percent in regular trading, gave up 1 percent in after-hours trading, as the outlook failed to top already-high expectations by investors. Intel shares have been on a tear since April, rising 25 percent from recent lows, and other chip companies have made bullish reports.

"What we had was pretty much results that were smack dab in line with what people were thinking in terms of expectations," said Michael McConnell, the semiconductor analyst with Pacific Crest Securities.

In a scheduled update, Intel targeted sales of $9.1 billion to $9.3 billion. In April, the company forecast sales of $8.6 billion to $9.2 billion.

Intel also forecast quarterly gross margins of about 57 percent, plus or minus a point, ahead of its previous forecast of 56 percent, plus or minus a couple of points. Gross margin is the percentage of sales left over after accounting for production costs.

The company also said it would get a boost from additional research tax credits that would lower its tax rate to an estimated 26 percent in the quarter, plus or minus a percentage point, from previous expectations of 31 percent. It also said it expected an additional $30 million in equity investments and interest.

"Confusion regarding higher investment gains and a lower tax rate is likely to limit dramatic upside in the stock," said Steve Neimeth, a portfolio manager for AIG SunAmerica who manages about $400 million in assets, including Intel stock.

Intel's sales are driven by the state of the personal computer market, whose fastest-growing portion is the portable PC. Last week, an Intel executive described demand for notebook computers as strong.

Intel's stock price has risen by about 25 percent from April lows, following a string of positive news, including its high-profile deal to begin supplying PC chips to Apple Computer Inc. (AAPL).

Expectations for a strong outlook had been building in recent days, analysts said, as two big chip makers, National Semiconductor Corp. (NSM) and Texas Instruments Inc. (TXN), turned in results and forecasts that were cheered by Wall Street.

On Wednesday, the Semiconductor Industry Association (search) boosted its annual forecast for chip sales, citing healthy demand for microprocessors, Intel's primary product.

In regular trading Thursday, Intel shares rose 60 cents, or 2.2 percent, to close at $27.70 on Nasdaq. In after-hours trading on Inet, the stock declined to $27.42.