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Intel predicts record sales

3rd quarter gains will rise due to demand for laptops

Intel Corp., the world's biggest computer-chip maker, said Thursday that third-quarter sales will rise to a record $9.8 billion to $10 billion, within previous forecasts, citing "strong demand" for laptops.

The prediction compares to a July forecast of $9.6 billion to $10.2 billion and analyst estimates of about $9.92 billion. Gross margin will be slightly above 60 percent, Chief Financial Officer Andy Bryant said on a conference call.

Intel, whose microprocessors power more than 80 percent of the world's personal computers, was among three chipmakers reporting Thursday. Intel's forecast was more muted than Texas Instruments Inc., which raised its predictions, and National Semiconductor Corp., which said demand was better than expected. All are benefiting from back-to-school U.S. sales of personal computers.

"The back-to-school season appears to be proceeding well. The tone right now is definitely positive," said Pierr Johnson, who helps manage $27 billion, including Intel shares, for Boston-based John Hancock Advisors Inc. Intel's sales "growth is nice, but it's certainly not more than they had originally expected."

Intel, based in Santa Clara, Calif., had revenue of $8.47 billion in the same quarter a year ago. Some investors were disappointed the company didn't raise its forecast to match increases by Texas Instruments and National Semiconductor. Intel shares, which have gained 12 percent this year, fell 29 cents to $25.80 in extended trading. They rose 43 cents to $26.09 in Nasdaq Stock Market composite trading. Texas Instruments rose 50 cents to $34.25.

"We continue to see healthy growth worldwide in the PC market," Bryant told investors on the call. "We are seeing a little better than the typical patterns for this period."

Intel is the world's second-largest technology company behind Microsoft Corp., judged by market capitalization, and its forecast is seen as an indicator of global demand for computers and their components.

Dallas-based Texas Instruments Thursday raised its sales forecast to $3.48 billion to $3.62 billion. National Semiconductor, which is based in Santa Clara, Calif., and whose chips boost battery life in mobile phones and laptops, reported sales and profit that topped analyst estimates.

National's Chief Executive Officer Brian Halla said electronics manufacturers are telling him that demand for cell phones and flat-panel televisions will remain strong until the end of the year.

Under Chief Executive Officer Paul Otellini, Intel is increasingly turning overseas for growth, helping dodge the impact of Hurricane Katrina and surging gas prices.

"The company continues to see double-digit year-over-year growth, driven primarily by strong demand for notebook PC platforms," Intel said in the statement.

Intel said it will bring back about $6.3 billion in income earned overseas, taking advantage of a tax break. The company will incur extra tax of about $250 million.

Intel, which doesn't forecast net income or earnings per share, is expected to have a profit of 36 cents a share in the third quarter ended Oct. 1, according to the average of 39 analyst estimates in a survey by Thomson Financial.

For the year Intel had forecast gross margin, or the percentage of sales left after production costs, of 59 percent "plus or minus a couple of points."

Of the 48 analysts who follow Intel, 31 suggest buying the stock, 15 have "hold" ratings and two recommend selling.

Contributing: Ellen Braitman; Connie Guglielmo