Intel, the world’s biggest semiconductor maker, said on Tuesday that third-quarter revenues were a record $9.96bn, 18 per cent higher than a year earlier.

However, it said an inventory build-up by its customers would hit fourth-quarter sales, causing a 3.5 per cent dip in its share price in after-hours trading in New York.

The third-quarter revenue figure was 8 per cent up on the second quarter and beat the analyst consensus of $9.92bn gathered by Thomson First Call.

However, Andy Bryant, chief financial officer, said the numbers benefited from an inventory build-up that saw about $100m in sales recorded in the third quarter rather than the fourth quarter.

After a period of tightness in supply, he said it was only natural that Intel’s customers would want to be able to respond to any upside in the fourth quarter by expanding their inventories. He said fourth-quarter revenues were expected to be between $10.2bn and $10.8bn, below analysts’ expectations that were at the top end of that range. Intel shares were down 3.5 per cent on the news at $22.89.

Third-quarter earnings per share rose from 30 cents a year ago to 32 cents, below analysts’ forecasts of 33 cents. Intel said a $140m charge to third-quarter cost of sales had reduced earnings per share by around 2 cents. This was part of a $300m settlement with MicroUnity to resolve a patent infringement case.

“In the third quarter, we achieved all-time records in company revenue and unit shipments across all of our major product lines,” said Paul Otellini, Intel chief executive.

Last week, Advanced Micro Devices, Intel’s main rival, also reported growth in processor and flash memory sales, with total sales rising 23 per cent on a year earlier.

Mr Bryant said gross margins should rise from 59.7 per cent in the third quarter to 63 per cent in the fourth quarter as the company benefited from the efficiencies of moving from 90 nanometre to 65 nanometre circuit widths.

For the full year, he anticipated revenues of $39bn, up 14-15 per cent on 2004 and gross margins of 60 per cent, up two percentage points.

“The combination of our 65m manufacturing network, broad range of new dual-core processors and unique ability to provide platform solutions positions us well for continued growth,” added Mr Otellini.

The company has suffered from capacity constraints in not being able to produce enough chipsets to accompany its processors. Mr Bryant said third-party suppliers were helping out with low-end desktop PCs.

“The numbers all seem fairly good, with the margins for the fourth quarter trending up,” said Apjil Walia, semiconductor analyst at RBC Capital Markets.

“The stock has underperformed significantly in the past few months and I think it looks more attractive at these levels.”

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