Intel chips go into four out five PCs built around the world

The world's biggest chip maker said earnings rose to $1.9bn in the three months to September - up 15% on profits of $1.66bn in the same quarter of 2003.

Revenues rose to $8.5bn, up from $7.8bn last year, in line with lower forecasts released by Intel last month.

Intel shares rose to $20.75 in after-hours trading from a $20.28 closing price on the Nasdaq.

"Growth was not as high as we originally anticipated due to inventory adjustments at some of our major customers and lower than expected overall demand for PCs," chief executive Craig Barrett said.

As a result margins are suffering, he added.

Last month, the California-based company lowered its revenue forecast for the period, blaming lacklustre demand from both consumers and businesses and oversupply problems.

Inventory build up

At the time, it estimated sales would range from $8.3bn to $8.6bn - down from original estimates of up to $9.2bn.

To help absorb excess inventory, which started building up in the second quarter, Intel is slowing production at its factories worldwide.

It may also write-off some or all the excess inventory as well as cut prices for the goods.

But the firm did add that record microprocessor shipments - driven by its server and mobile computing chips - had driven demand in the three months to September. Motherboard and chip set revenues also set a record.

Looking ahead, the group - which has its chips in four out of every five PCs built in the world - forecast fourth-quarter revenue of $8.6bn to $9.2bn.

Intel has had a rough ride recently in the face of increased competition from rival Advanced Micro Devices (AMD), delays in plans for new chips and product recalls and cancellations.