For the fourth quarter, the Santa Clara, California-based chipmaker posted net income down 2% at $2.12 billion, from $2.17 billion a year earlier. Sales however were up 10% at $9.59 billion, from $8.74 billion. Analysts had expected Intel to report fourth-quarter revenue of $9.4 billion. For the year ending December 25, it posted net income of $7.51 billion, up from $5.64 billion, on sales up at $34.20 billion, from $30.14 billion in 2003.

The strong results were in sharp contrast to its competitors. Earlier this week, shares in AMD had plummeted after the chipmaker warned of lower profits because of tough competition in the memory market. Another chipmaker, STMicroelectronics, also warned that its margins have been squeezed because of the decline in value of the US dollar.

Additionally, industry analysts are still predicting that the chip industry could shrink as much as 5% this year. Yet looking forward, Intel issued a healthy outlook for the first quarter, saying that sales should be between $8.8 billion and $9.4 billion. The Wall Street consensus had been $8.9 billion.

Intel also delighted Wall Street when the chief operating officer, Paul Otellini, said during a conference call that corporate tech spending is picking up, and that he expects this trend to continue. He said Intel experienced strong demand for the Centrino chips that give laptop computers wireless internet access, and said notebooks accounted for almost 50% of holiday sales of PCs in the US market.

Intel is planning for double-digit growth in PC unit sales, compared with 12% growth in 2004. Mr Otellini indicated that Intel plans to spend $5.1 billion on capital spending as it adds new factories this year, compared with $3.8 billion in 2004. It will also spend a record $5.2 billion on research and development, up from $4.8 billion a year earlier.

Intel’s success has stemmed from a number of developments. Strong holiday season demand for notebook and server computers helped it cut a stockpile of unsold chips by 18%. Mr Otellini believes sales are being boosted as companies replace outdated computers.

Moreover, Intel appears to have taken market share from rival AMD in flash-memory chips for mobile phones.

The market reacted in its typical fashion following the results. Shares in the company rose 3.3% to $23.30. Yet it should be remembered that Intel has a habit of forecasting weakness, and then beating its own forecasts.

The market is naturally desperate for signs of an improving sector, but if Intel’s forecasting capabilities are so often amiss, one has to question how accurate its predictions of a pickup in corporate tech spending might be.

Additionally, Intel is itself very keen to talk up the market. Last year its stock plunged approximately 27% after a number of production mistakes, rising inventory levels, and margin declines worried the markets. There were also concerns that the company was losing its technological edge to rivals such as AMD.