Intel Corp forecast quarterly revenues well above Wall Street's estimates, defying fears the world's top chip maker is struggling to find its footing as personal computer sales growth wanes.
Sales held up strongly despite a hiccup in sales of its Sandy Bridge processors after the discovery of a chipset design flaw. This eased fears that the growing popularity of smartphones and tablets would begin to eat into the PC chip business.
Shares of Intel rose 3.5 percent in extended trading after closing up 1.22 percent on Nasdaq.
The PC Client Group revenue was much higher than anyone anticipated. Everyone expected some poor numbers there due to the Sandy Bridge delays, said Avian Securities analyst Win Cramer.
The company reported a 25 percent jump in first-quarter revenue to $12.8 billion, beating estimates. First-quarter net income was $3.2 billion, up 29 percent over the year-ago period. Earnings per share were 56 cents.
Analysts had expected first-quarter revenue of $11.59 billion, according to Thomson Reuters I/B/E/S.
Concerns that Apple Inc's iPad tablets are squeezing sales of traditional PCs have hung over Intel, along with worries across the electronics industry about supply constraints after Japan's March 14 earthquake and tsunami.
Computer sales in the first quarter fell for the first time since 2009 as Apple's iPad attracted buyers in droves and Japan focused on recovering from the earthquake and tsunami, according to research firm Gartner.
Tuesday's report was the first to include results from Intel's $7.68 billion acquisition of data security firm McAfee and its $1.4 billion purchase of Infineon's wireless unit. The fiscal first quarter also had one more week to it than usual.
Helped by those additions, Intel said revenue in the current quarter would be $12.8 billion, plus or minus $500 million.
Analysts had expected revenue of $11.59 billion for the first quarter and $11.87 billion for the second quarter, according to Thomson Reuters I/B/E/S.
In February, shipments of Intel's new cutting-edge Sandy Bridge processors were interrupted after a flaw was discovered in a chipset used alongside them.
Intel said the defect would mean $300 million less in revenue for the first quarter, and cost $700 million to repair and replace. But it expects the lost sales to be made up for in later quarters.
CFO Stacy Smith said he saw no hindrance to their production despite supply constraints that are limiting the shipment and availability of electronics parts from Japan.
We don't see anything that limits our ability to produce to (meet) demand, and we're not seeing anything that limits the ability to make PCs, Smith told Reuters in an interview.
(Reporting by Noel Randewich; Editing by Richard Chang)