Sept. 10 (Bloomberg) -- Intel Corp., the world's largest computer-chip maker, raised its quarterly sales forecast after taking customers from Advanced Micro Devices Inc.

Sales will increase to between $9.4 billion and $9.8 billion, the Santa Clara, California-based company said today in a statement.

Chief Executive Officer Paul Otellini beat back a challenge from Advanced Micro this year, speeding up chip development and shedding units after a 42 percent drop in profit in 2006. Today's report shows personal-computer demand improved industrywide, and Intel's new processors allowed Otellini to grab more sales from customers including Dell Inc.

``It's a good endorsement of what their plan has been,'' said Bill Gorman, an analyst at Philadelphia-based PNC Wealth Management, which owns 8.9 million Intel shares.

Intel's gross margin, the percentage of sales left after production costs, will be ``in the upper half'' of its forecast for 52 percent, plus or minus a couple of points, Intel said. The margin was 46.9 percent in the second quarter.

Analysts on average estimated sales of $9.33 billion for the period, according to a Bloomberg survey. Intel, which earlier forecast sales of $9 billion to $9.6 billion, said the boost came from ``stronger than expected worldwide demand'' and didn't provide specifics on what is driving the gains.

Chip Stocks

Intel, whose results are viewed as an indicator of demand for computers and related components, fell 12 cents to $25.35 at 4 p.m. New York time in Nasdaq Stock Market trading after earlier gaining as much as 2.9 percent. The shares have risen 25 percent this year.

The announcement lifted rival chipmakers' stocks. Advanced Micro, down 36 percent this year, added 33 cents to $12.94 on the New York Stock Exchange. Micron Technology Inc., the largest U.S. maker of PC memory chips, rose 24 cents to $11.64.

The forecast underscores Otellini's effort to revive sales and rebuild Intel's image with investors after falling behind Sunnyvale, California-based Advanced Micro in new products. He got out of money-losing businesses, cut jobs and accelerated product introductions.

RadiSys Corp., which makes motherboards and rack-mounted servers, said today it agreed to buy a communications business from Intel for about $25 million to expand its line of products for equipment manufacturers. Intel also is spinning off a flash- memory unit in a venture with Geneva-based STMicroelectronics NV.

China's Gains

Intel makes more than 70 percent of the world's PC processors. The higher sales may stem in part from surging demand from emerging markets such as China, said John Lau, an analyst at Jefferies & Co. in New York.

``There is continuing very strong demand in China,'' said Lau, who has a ``buy'' rating on the stock and doesn't own it. ``People have to realize the PC market is not about the U.S., and all of the emerging markets are showing growth right now.''

Lau said that PC shipments probably jumped about 11 percent in the third quarter from the second, compared with expectations of 7 percent growth. Banc of America analyst Sumit Dhanda and Credit Suisse's John W. Pitzer raised their forecasts for Intel last week on demand for PCs and laptops.

``It's a very attractive time to go out and buy a PC, not just in the U.S., but globally,'' said Doug Freedman, an analyst at American Technology Research in San Francisco who rates the shares ``buy'' and doesn't own them personally.

The chipmaker will report final results Oct. 16.

To contact the reporter on this story: Ian King in San Francisco at ianking@bloomberg.net

Last Updated: September 10, 2007 16:28 EDT