The biggest shift in the last six months is our ability to participate in servers, he said on a conference call. The fact that we have record server unit numbers is a very good leading indicator of Intel being back in its game across the board I think. He said the company was outpacing the industry in server-chip sales.

It also seems the pricing wars with AMD over desktop microprocessors, which more than any other segment battered both chipmakers during the past 18 months, subsided in the recent quarter as average selling prices rose.

The third quarter also saw unusually high unit growth, bucking seasonal patterns, said Intel CFO Andy Bryant, who has been promoted to chief administrative officer. It was the highest sequential growth in 10 years, Bryant said.

This all contributed to Intel’s 15% increase in total revenue to $10.09bn during the quarter from $8.74bn a year ago. On the whole, revenue growth was broad based, Otellini said.

However, Intel had more than its share of legal troubles during the third quarter; it was charged for antitrust violations in Europe and South Korea. And AMD’s 2005 antitrust case against Intel is ongoing.

Profit for the period rose to $1.86bn, or 31 cents a share, from $1.3bn, or 22 cents, last year. These numbers beat analysts’ average forecast of a 30-cent profit on $9.6bn in revenue, following Intel raising its revenue outlook in early September to between $9.4bn and $9.8bn from between $9bn and $9.6bn.

Another factor in Intel’s success for the quarter was its ability to boost gross margins to 52.4% from 46.9% in the prior quarter. This was due partly to higher volumes and lower unit costs and partly because Intel walked away from low-margin deals in mobile and other business segments, Otellini said. We were more particular on what businesses we chose, he said. We will continue to take a very selective approach to this.

Gross margin should be nearly 5 points higher in fourth quarter, Bryant said.

Intel also shed 2,000 more workers during quarter and now has about 88,000 in total, or 12% fewer workers than a year ago. The job losses are part of a broader restructuring at Intel, which it hopes will save it $2bn this year and another $1bn in 2008. Bryant said the company was on track for that level of savings by next year.

During the recent quarter, Intel saw record sales in Asia Pacific. It was a very strong quarter in Europe also, particularly in notebooks sales, Otellini said. One thing you’ll see that’s inventible, as notebook volumes grow notebook prices will come down, particularly in consumer segments. In the grand scheme of things, that’s good news for us, he said.

Also in the quarter, the company launched first quad-core for high-end multi-processor servers. It now has more than 20 quad-core chips across all its product lines, and shipped 2 million of them in the third quarter.

Intel didn’t break out server or desktop revenue, but Otellini said there was an increase in units shipped and revenue in both corporate and consumer desktops, both sequentially and year-over-year.

Notebook ASPs were slightly down in the quarter yet total mobile revenue grew more than 30% year-over-year. Otellini declined to comment on server ASPs. The total ASPs for all Intel products were flat sequentially.

Bryant will be replaced by Stacy Smith, an Intel staffer for 19 years, who will be promoted from assistant CFO. The moves are part of the company’s long-term management succession planning, Otellini said.

Intel shares rose more than 5% to $26.79 in after-hours trading on the Nasdaq yesterday.

Our View

Intel may have regained marginal share from AMD in the server microprocessor market, but AMD remains a formidable competitor with its latest Opteron server chip.

AMD also will likely enjoy a boost from better desktop prices and all signs point to it recovering well from an earlier inventory glut. It reports its earnings on Thursday.