80% of PCs run on Intel chips

Revenue growth was driven by sales of chips used in servers and portable computers, as well as demand in booming economies such as India and China.

Intel also said it had sorted out inventory problems.

Sales in the three months ending 25 December were $9.6bn (�5.1bn) from $8.7 a year earlier. Profit was $2.12bn.

Analysts had expected sales of $9.42bn.

Turning point

"It's a terrific report," said Stephen Leeb, president of Leeb Capital. "Intel is clearly the bellwether, and this report could easily turn the tech sector."

Total sales for 2004 were $34.2bn, 14% higher than in the previous twelve months.

Intel shares rose 3% to $23.20 in electronic trading after Wall Street had closed. The news also lifted stocks such as Applied Materials, a company which makes equipment used to produce computer chips.

Until Intel's announcement, analysts and industry insiders had been cautious about the outlook for earnings.

Intel rivals Advanced Micro Devices and STMicroelectronics have both disappointed investors with forecasts.

AMD shares fell 26% on Tuesday after the firm issued a profits warning, citing a "challenging" market for its flash memory products - used in devices like mobile phones and digital cameras.

Fourth quarter profits were expected to be "down significantly" from the third, AMD said.

By contrast, Intel said that it was targeting sales of between $8.8bn and $9.4bn in the current three month period, with chief financial officer Andy Bryant hinting that the company may be slightly pessimistic.

Mr Bryant, however, said that there still is fierce competition from rivals.