Intel Quells Tablet Fears with Strong Outlook

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Intel posted better than expected revenue and margins and gave a strong outlook for early 2011 -- enough to quell concerns over the company's fate over the rise of tablet computers that are most often based on ARM, not Intel, processors.

SAN FRANCISCO, Jan 13 (Reuters) - Intel Corp (NASDAQ:INTC) posted better-than expected revenue and margins for the fourth quarter and gave a rosy outlook for early 2011, defying worries about the chipmaker's minor role in the booming smartphone and tablet computer market.

Shares in the world's largest chipmaker, whose net profit surged 48 percent year on year, gained 2.4 percent, driven by hopes for strong sales of its Sandy Bridge microprocessors, its newest and most advanced line.

Intel is the first major technology company to report its fourth-quarter results and its upbeat numbers set a positive tone for the rest of the sector. Shares of companies like Dell (NASDAQ:DELL) and Microsoft (NASDAQ:MSFT) moved up in after-hours trade.

"The expectation was there might be a miss. There is a lot of concern over smartphones and tablets, but that will take a backseat in the meantime," said Mahesh Sanganeria, an analyst at RBC Capital Markets.

Despite an apparent early success with Sandy Bridge, Intel faces sluggish personal computer sales and a major challenge from the exploding popularity of mobile devices, a market dominated by Britain's ARM Holdings (L:ARM)(NASDAQ:ARMH).

Intel's processors are the brains in 80 percent of the world's PCs but the company has yet to make its mark in mobile gadgets that people increasingly depend on to surf the Web and update their social networking profiles.

"Right now there's just a larger overhang over the stock when it comes to tablets and smartphones. That may be an area where investors are more cautious," said Patrick Wang, an analyst at Wedbush Securities.

But for the shorter term, many investors are betting on a bump in revenue growth from the chip giant's newest product line, considered one of its most important advances in computer processing power. Intel unveiled its Sandy Bridge microchip last week.

"It seems to be getting widespread acceptance from the customers. Even with the consumer market being a little bit weak we expect it to ramp sales nicely in Q1," Chief Financial Officer Stacy Smith told Reuters.