Chip-maker Intel sparked optimism in the technology industry this week, reporting earnings above Wall Street estimates.

But the upbeat mood was short-lived as analysts noted the company's reduced spending forecasts and suggested this spelt bad news for the semiconductor market, of which Intel is the biggest supplier.

The US group reported earnings in the final three months of last year of more of $1bn (�620m), more than double those in the same period of 2001.

Profits for 2002 as a whole were up 144% on the depressed levels of the year before.

However, Intel cautioned that 2003 would be an unpredictable year.

"Continuing uncertainty in global economic conditions makes it particularly difficult to predict product demand and other related matters," said Intel chief executive Craig Barrett.

Sector barometer

I think it's actually a good thing that they're throttling back spending Douglas Lee, Banc of America Securities

Intel makes chips and other components for computers, so is closely watched as an indicator of how the technology sector as a whole will fare.

The company hinted at good news in October, when Mr Barrett said he expected conditions for the sector to improve during 2003.

But in its latest statement, Intel warned that capital spending would fall in 2003, from $4.7bn (�3bn) in 2002 to around $3.9bn this year.

However, the group said the average price for its microprocessors was still rising - a positive sign anticipated by analysts as a sign that pricier laptops and servers are dominating sales.

"Europe was strong, the US was a little bit stronger," said Intel's chief financial officer Andy Byrant.

Growth in Europe was boosted by a good performance in emerging markets, particularly Russia, John Woodget, Intel's Europe marketing manager told BBC World Service Radio.

Intel shares were almost unchanged in after hours trading, at $17.80.

"I think it's actually a good thing that they're throttling back spending," said Douglas Lee at Banc of America Securities.

"It means they're focused on their own return on invested capital."