Intel Corp forecast upbeat fourth-quarter sales and margins as resilient demand from emerging markets and corporations offset weak consumer spending, raising hopes that the technology sector could end 2010 on a strong note.

Shares of Intel and rival Advanced Micro Devices Inc, which have warned about weak consumer demand for computers, climbed 1 per cent in after-hours trade.

In Asia, shares of Hynix Semiconductor, the world's No. 2 memory chipmaker, rose 2.4 per cent and Elpida Memory gained 2.3 per cent as Intel improved the outlook for the latest tech earnings, which some have feared could spell a disappointing holiday shopping season.

After investors lowered their expectations for chip companies, semiconductor stocks surged through September in part on the belief that the worst might be over for the technology sector.

Intel's forecast for a better-than-expected December quarter gross margin of 67 per cent -- plus or minus a couple per centage points -- affirmed hopes that higher-end spending on servers or data centers may help offset a loss of computer sales to a booming tablet segment.

And Chief Executive Paul Otellini told analysts on a conference call on Tuesday that early demand for Sandy Bridge -- its next-generation chip combining central processing and graphical functions -- was much greater than originally anticipated.

"Intel has set a high bar for tech earnings," said Canaccord Genuity analyst Bobby Burleson. "There was concern about Q4 ... and the number is better than the Street expected."

The world's largest chipmaker forecast revenue of $11.0 billion to $11.8 billion in the final three months of 2010, in line with analysts' expectations of $11.32 billion, according to Thomson Reuters.

"We'll see the consumer market growing but likely a little less than you'd normally expect. I attribute that to consumers pulling back a little bit based on economic uncertainty," Intel Chief Financial Officer Stacy Smith told Reuters.

Little numbers drama

Analysts also warned that not all semiconductor makers would do as well as Intel.

Linear Technology Corp, which makes products such as amplifiers and voltage regulators, said on Tuesday its total bookings fell sequentially in the quarter.

"PCs have been beaten up a lot so sentiment is low enough that it's hard to disappoint," said Patrick Wang, an analyst at Wedbush.

Shares of Intel rose to $20 in extended trading after closing 1.07 per cent higher at $19.77 on Nasdaq.

Its third-quarter net profit was $2.955 billion, or 52 cents a share, versus $1.86 billion in the year-ago quarter. That was slightly higher than the 50 cents per share expected by analysts.

Revenue in the quarter ended Sept. 25 was $11.1 billion, slightly above the $10.99 billion expected.

Longer term, Wall Street remains concerned about the threat to Intel, whose microprocessor brains drive eight out of 10 of the world's personal computers, from the fast-growing tablet segment popularized by Apple's iPad.

"Consumers will have a limited amount of discretionary income and some will choose to purchase a tablet instead of upgrading an existing PC or purchasing a netbook in any given period," Otellini conceded on the conference call.

On top of soft US and European demand, the PC industry has faced rising inventories for chips and other components that have led some customers to reduce their orders for new parts.

Global semiconductor sales could grow just 5 per cent next year as the economy continues to struggle, according to market research firm iSuppli.

Intel's results were buoyed by a 3 per cent sequential increase in data center sales, a business with higher margins than chips for PCs.

Some investors also believe tech vendors' sales will pick up in the final months of 2010 as shoppers warily spend on holiday gifts -- but an out-sized amount will go to smartphones and tablets while sales of PCs flounder.

Smith said computer manufacturers are using up stock to make way for the Sandy Bridge microchips due out early next year.

Intel would like to see its new microprocessors counted on to handle the mainstream graphics needs of new PCs, although manufacturers might continue to include specialized graphics chips in their products.

Intel's new chips are not expected to satisfy high-end users, such as gamers willing to splash out hundreds of dollars separately for top-of-the-line graphics cards. That market is now dominated by Nvidia and AMD.

Intel said that by early 2011 it should close its acquisitions of the wireless unit of German chipmaker Infineon for $1.4 billion and security software specialist McAfee Inc for $7.7 billion. Both deals were announced in August and seen as helping Intel establish itself in the fast-growing mobile market. – Reuters