Intel Corp warned third-quarter revenue could fall short of its own estimates by more than $1 billion, reinforcing doubts about the strength of a technology sector recovery.

But shares in the industry bellwether, which dominates the market for PC microprocessors, gained a bit on Friday because investors had braced for bad news and were relieved the downward revision had not been worse.

Global stocks also rose after U.S. economic growth data topped estimates, as Federal Reserve Chairman Ben Bernanke said the central bank was ready to counter a softening recovery. A number of fellow tech heavyweights, including International Business Machines Corp, firmed.

Some analysts pointed to a silver lining: Intel said resilient corporate demand was helping prop up average prices even though consumer demand in mature markets was weaker than expected.

Even though the news is bad, the bad news is already in the valuation. Obviously, business isn't going great there, but the stock is so cheap this doesn't matter, said Stephen Massocca, managing director at Wedbush Morgan.

Intel shares were up 0.7 percent at $18.30 on the Nasdaq in afternoon trade, after falling earlier in the day to $17.81, their lowest level since July 2009. Shares in the world's largest chip maker have slid 15 percent since the middle of July.

It now expects third-quarter revenue to be between $10.8 billion and $11.2 billion, down from a previous forecast of $11.2 billion to $12.0 billion and analysts' average expectation of $11.5 billion, according to Thomson Reuters


People were relieved it was not worse, said Avian securities analyst Dunham Winoto.

Intel now sees gross margins in the period of 65 to 67 percent. It had previously forecast gross margins of 67 percent plus or minus a couple of points -- near a record high for the company.

The big news is enterprise and server demand is holding up. And Intel still expects to grow (revenue) and gross margins also, said JMP Securities analyst Alex Gauna.

While a still-shaky economic recovery may make families think twice about upgrading their computers, experts say future growth in the microchip industry lies in smartphones and tablets, areas that Intel is far from dominating.

To bolster its stake in the mobile microchip market, Intel is likely to announce a deal this weekend to buy part or all of German chipmaker Infineon Technologies AG's wireless business, people familiar with the matter told Reuters.

(Additional reporting by Jennifer Saba, Liana B. Baker and David Gaffen; writing by Edwin Chan; editing by Matthew Lewis and Gerald E. McCormick)