Due to strong demand in North America and Europe, Intel said it now expects revenues will be 8 per cent to 10 per cent above the second quarter's revenues of $5.9 billion.

In July, Intel said third-quarter sales likely would be flat to be slightly higher than second-quarter levels.

``The increase in demand is broad-based,'' said a spokesman for the Santa Clara, Tom Waldrop California-based chip maker.

``It's a cross products and geographies, particularly North America and Europe...,'' Waldrop said. ``It's a combination of customers replenishing inventories and better-than-expected sell-through (by computer distributors).''

A glut of inventory among distributors was one factor that hurt Intel's earnings in the first and second quarters.

Intel will report its third-quarter earnings on October13.

The company said its third-quarter gross profit margins were expected to be a couple of points above the second quarter's 49 per cent. The improvement in the gross margins represents the effect of write-offs for improving manufacturing efficiencies and Intel's previously announced job cuts.

The announcement is likely to lead analysts to raise their earnings estimates for Intel's third quarter. According to First Call, which tracks analysts' estimates, the consensus on Wall Street was for earnings of 73 cents a share.

Analysts said those estimates will likely to be raised on Friday to the 78 cents to 80 cents a share range.

The news is a big boost for the chip maker, which has seen its earnings hit in the first half of the year fall due to increased pricing pressure from rivals, a sluggish PC market despite falling PC prices and weakness in Asia.

``Obviously it's inventory-related,'' said an SG Cowen & Co analyst Drew Peck. ``The bottom line is that investors need to tread very carefully beforejumping in at these levels, until we see stronger evidence of a big pick-up in PC demand.''

Intel has initiated several cost-cutting measures, including eliminating 3,000 jobs and temporarily shutting some plants, amid a massive wave of layoffs in the world semiconductor industry. The PC slump, economic malaise in Asia and a glut of product inventory have all lead to the longest running slump in the semiconductor industry.

``To paraphrase (Alan) Greenspan, they are a beacon of light,'' said an analyst Ashok Kumar at Piper Jaffray. ``We think Intel is an oasis of prosperity in this world of distress.'' Kumar has had a strong buy rating on Intel.

Intel said it has had a better-than-expected September, which is a key month for the third quarter. In the past two weeks, some Wall Street analysts have either raised their ratings on Intel, or made positive comments about the quarter.

``The sky isn't falling,'' said a Morgan Stanley Dean Witter analyst Mark Edelstone . ``I have been very bullish. PC demand isseasonally strong and the inventory correction ended in June. Those are all positive signs for any company selling semiconductors into the PC market right now.''

Also on Thursday, Santa Clara, California-based National Semiconductor Corporation reported a smaller-than-expected first quarter loss, citing soft sales during the summer quarter, but also forecast its losses will narrow in the second quarter.

In after-hours trading, Intel stock was up $5. Intel's comments, plus better earnings news from other technology companies such as Oracle Corporation, Adobe Systems Inc, and narrowing losses at National Semiconductor, could spark a technology rally on Friday.

``You have to have some conviction that the quarter will hold up like it is,'' said Scott Nirenberski, an analyst at CS First Boston. ``Clearly they must have some confidence that things are OK.''