Intel Beats, Raises Guidance

Intel beats expectations and raises guidance for the current quarter.
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(Update includes premarket trading action.)

Intel

(INTC) - Get Report

crushed it -- beating expectations and raising guidance for the current quarter.

The Santa Clara, Calif.-based chipmaker posted an adjusted profit of $1 billion, or 18 cents a share. That is down from the 28 cents in the year-ago period but more than twice the 8-cent pro forma profit target analysts had for the stock, according to Yahoo! Finance.

Sales for the second quarter were $8 billion, which is down 16% from the $9.5 billion level last year at this time. Analysts were looking for sales of $7.28 billion.

Gross margins swelled 5 percentage points to 50.8% in the quarter as Intel managed to balance its high costs with lower sales levels.

Looking ahead, Intel says it expects further margin expansion to 53% in the third quarter. The chip shop also expects sales to be in the range of $8.5 billion, that's well above the $7.8 billion Wall Street was expecting.

"Intel's second-quarter results reflect improving conditions in the PC market segment with our strongest first- to second-quarter growth since 1988 and a clear expectation for a seasonally stronger second half," CEO Paul Otellini said in a press release Tuesday.

Intel appears to have dug itself out from under last year's

pile of surplus chips

and adjusted to the cannibalistic attack of the popular netbook trend. Intel sells Atom chips to netbook makers, but increased sales of the stripped-down notebooks has been

eroding

Intel's multicore chip business.

Recent trends in mobile computing still threaten Intel's chip dominance however. No. 1 PC maker

Hewlett-Packard

(HPQ) - Get Report

has started

working with

mobile device chipmaker

Qualcomm

(QCOM) - Get Report

on new mini-notebooks. Intel was forced to forge its own

mobile device partnership

with No. 1 cell phone maker

Nokia

(NOK) - Get Report

last month.

The stock was up 7.7%, to $18.12 in recent premarket trading.