Intel boosted its forecasts for revenue and profit margins yesterday due to stronger demand from computer makers, sending its shares to a 14-month high and lifting technology shares overall.

The world's biggest maker of computer chips, which employs more than 3,000 staff in the Republic, said it expected third-quarter revenue to increase roughly 11 per cent from the second quarter, to $7.3-$7.8 billion (€6.68-€7.1 billion). It had earlier set a target of $6.9-$7.5 billion, up about 6 per cent from second-quarter revenue of $6.8 billion.

Intel's chief financial officer, Mr Andy Bryant, said shipments of microprocessors, the brains of computers, were unexpectedly strong in every region. He declined to call a definitive recovery in the ailing microchip industry, however, and said sales of communications chips remained soft.

The surprise statement by Intel came two weeks before it was due to update Wall Street on its third quarter. In heavy trading, shares of the firm surged to their highest price since late May 2002, just before the stock collapsed following a profit warning from the company. The stock, which earlier hit a high of $29.04, was trading at $28.25 at midday, up 7.1 per cent.

Following a three-year slump, the chip industry's worst ever, signs indicate a building recovery. The Intel forecast was likely to boost expectations for a quicker turnaround.

Blue-chip stocks had rallied on Intel's forecast, but retreated in late morning. Technology stocks, which have risen for months on expectations of a turnaround, extended gains.

Mr Bryant said Intel's improved revenue forecast stemmed primarily from an increase in the number of microprocessors sold, as opposed to a rise in prices. Still, he said, he was not concerned that an increase in chip demand would require a boost in spending on new chip-building tools.

"I'm really not worried that capacity is a great limiter," he said. "I would love to have to face that problem."

Intel's new state-of-the-art fabrication plant in Leixlip, Co Kildare, is due to go into full production early next year.