Intel, AMD Report Surge in Demand

The two leading chip companies said Thursday that the fourth quarter was shaping up stronger than they had expected as demand rose for personal computers and cellular phones.

Santa Clara, Calif.-based Intel Corp., the world’s biggest chip maker, said fourth-quarter sales would come in between $6.8 billion and $7 billion, up from an October estimate of $6.5 billion to $6.9 billion. The company attributed the increase to growing demand for processors in Asia.

Gross margin, the percentage of sales left after paying production costs, will be at the high end of the Intel’s prior forecast of 49%, “plus or minus a couple of points,” the company said.

No. 2 chip maker Advanced Micro Devices Inc. also said it expects fourth-quarter sales of close to $700 million, a 35% jump over the third quarter. Previously, AMD predicted a 20% increase. Analysts surveyed by Multex had forecast revenue of $599.6 million for the three months ending Dec. 31.

The Sunnyvale, Calif., company said the improvement is the result of greater-than-expected demand for PC processors as well as flash memory, which is used in cell phones. The maker of Athlon and Duron processors did not say how the revenue increase would affect its expected fourth-quarter loss.

The rosier outlooks boosted shares of both companies Thursday. Intel stock, which fell 78 cents to $18.96 in regular Nasdaq trading, jumped to $19.43 in after-hours trading. AMD rose 40 cents to $8.25 on the New York Stock Exchange.

The reports show that conditions are better in the current quarter than companies expected even a few months ago, although the end of the year is typically strong due to holiday sales, said Mark Grossman, an analyst at SG Cowen Securities.

“If you add up the total for the second half [of the year], it’s still down 20% from the first half,” Grossman said. “At this point the real question is do we get a corporate upgrade cycle next year in PCs? All we’ve seen is a seasonal pickup.”