By Don Clark and Anne Steele 

Intel Corp. boosted its guidance for financial results in the third quarter, the latest sign that demand for some classes of personal computers has improved.

Stronger buying activity seems mostly concentrated in high-end laptops and gaming PCs, analysts and industry executives said, while demand for entry-level PCs remains weak.

Intel, which supplies microprocessor chips used in close to 90% of all PCs, said it now expects third-quarter revenue of $15.6 billion, plus or minus $300 million, up from a previous range of $14.9 billion, plus or minus $500 million. In the year-ago third quarter, revenue was $14.47 billion. The company also boosted its gross margin forecast by 2 percentage points.

Intel shares rose 2% to $37.30 in midday trading in New York. Before Friday, the stock had risen 6% in 2016.

Intel attributed the increase in revenue primarily to moves by hardware makers to replenish their inventories of finished PCs and components. "The company is also seeing some signs of improving PC demand," Intel said in a press release.

The company didn't elaborate. But Stephen Baker, an analyst who tracks sales in U.S. retail and distribution channels for NPD Group, said customers have lately have been buying more premium laptops, as well as those that convert between clamshell and tablet mode, and hardware targeted toward gaming.

Such purchases tend to lead toward faster Intel chips with higher price tags. "I think what they are probably seeing is a lot of shifting from more entry-level processors to more premium processors," Mr. Baker said.

One company feeling a substantial upswing in sales is Falcon Northwest, a boutique Oregon-based maker of gaming PCs typically priced at $3,000 to $5,000. Kelt Reeves, its president, said sales in the fiscal quarter ended in August rose 49% -- the strongest since the company was founded in 1992.

Falcon's PCs use Intel microprocessors. But Mr. Reeves attributed recent demand to the arrival of new graphics chips from Nvidia Corp., which help improve the visual effects in game software, as well as the arrival of new virtual-reality headsets that need to connect to powerful PCs for the most vivid experiences.

Mr. Baker of NPD agreed with Mr. Reeves that Nvidia technology, rather than Intel's latest microprocessors, is likely spurring consumer purchases.

"Intel's PC growth trajectory remains challenging with new products having little to no impact on demand," said Stacy Rasgon, an analyst with Sanford C. Bernstein, in a research note.

Personal computer shipments continued their steady decline of the past two years in the second quarter, research firms International Data Corp. and Gartner Inc. said in July, but the declines were less severe than in recent periods. Intel said that month that second-quarter revenue in the "client" business that includes PC chips declined 3% from the year-earlier period.

Brian Krzanich, Intel's chief executive since 2013, has tried to push the company into markets beyond PCs such as connected cars, wearable devices and devices used to handle retail transactions. The company has largely failed to place its chips in many smartphones, but so-called teardown reports on Friday from research firms that disassemble new devices showed that Intel technology has been included in some new Apple iPhone 7s.

Intel is set to report earnings for the third quarter ending in September on Oct. 18.

Write to Don Clark at don.clark@wsj.com and Anne Steele at Anne.Steele@wsj.com

 

(END) Dow Jones Newswires

September 16, 2016 15:24 ET (19:24 GMT)

Copyright (c) 2016 Dow Jones & Company, Inc.
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