Update: Intel Beats Expectations, Doubles 2Q Profits

It's the third consecutive quarter that Intel has exceeded forecasts, though executives and analysts said there's no evidence to suggest a long-hoped-for upswing in consumer and corporate computer buying.

"I haven't seen a PC upgrade cycle. I haven't seen evidence of corporate [technology] budgets going up," Andy Bryant, Intel's chief financial officer, said Tuesday. "What it really feels like is more of a return of the old days, where second halves are a little bigger than first halves, and if you're lucky, enough bigger you get a little bit of underlying growth."

Intel expects third-quarter sales to be between $6.9 billion and $7.5 billion-- well above last year's third-quarter revenue of $6.5 billion.

For the three months ended June 28, Intel earned $896 million, or 14 cents per share, on sales of $6.82 billion. That compares with a profit of $446 million, or 7 cents per share, on revenue of $6.32 billion in the same period last year.

Analysts surveyed by Thomson First Call were expecting a profit of 13 cents a share on sales of $6.7 billion. In June, the company narrowed its own revenue forecast to between $6.6 billion and $6.8 billion.

"Overall, the quarter came in slightly better than we expected, led by good demand in our computing-related business, which posted solid year-over-year results," Intel CEO Craig Barrett said.

Intel said its microprocessor business is performing at the high end of seasonal expectations. Sales grew nearly 12 percent, to $5.8 billion from $5.2 billion in the same period last year.

It recently released a Pentium 4 at 3.2GHz and introduced new chipsets that overcome bottlenecks in the data flowing between the processor and memory and hard drive. It's also heavily marketing its Centrino brand of chips for wireless laptop computers.

"Centrino is hitting all the targets we set for it," Bryant said.

At the same time, rival Advanced Micro Devices has been struggling to boost its processors' performance and last month warned its second-quarter sales would fall $100 million short of expectations.

"It's not so much has Intel turned the corner, but has the industry turned a corner?" said Martin Reynolds, a Gartner analyst. "Intel had a pretty good-looking quarter along with great strengths in Asia-Pacific. If we go back a few weeks, we find AMD warning it's not going to have such a good quarter, with great weakness in Asia Pacific."

Without stiff competition from AMD, Intel also has been able to keep prices steady.

"The [Pentium 4] performance continues to advance, whereas AMD is dealing with a processor that, although it had a great run, is most certainly getting old," Reynolds said. "They can't quite deliver the price performance that Intel is now offering, which is now squeezing them. So Intel captures that revenue."

Corporate and consumer spending is expected to revive in the second half of the year, provided the overall economy continues to pick up.

But Intel's communications chip business continued to struggle. Earlier this year, it raised the price of flash memory used in cellular phones and saw business drop off dramatically.