Intel said yesterday its fourth-quarter profit ballooned as a strong rebound in the personal computer market overcame a hefty payment Intel made to its biggest rival.

Intel also said its revenue and profit margin in the current quarter could be better than analysts are expecting, and its shares rose in extended trading.

Computer shipments grew more sharply than expected in the fourth quarter after the recession led to a brutal year for the industry.

With Intel supplying the vast majority of PC microprocessors, the company generated net income of $2.3 billion (£1.4 billion), or 40 cents a share.

That was more than nine times as much as it earned in the year-ago quarter, when profit totalled $234 million (£143 million), or 4 cents a share.

Sales climbed 29 per cent to $10.6 billion (£6.4 billion). Intel pegged the increase to brisker PC chip sales.

It also said average selling prices for chips destined for server computers were higher than a year ago.

Analysts expected a profit of 30 cents a share and $10.2 billion (£6.2 billion) in revenue, according to Thomson Reuters.

Intel's gross profit margin was 64.7 per cent of revenue - its best ever, the company said. Gross margin is a key measure for a manufacturing-intensive company because it reflects how well the company is controlling costs.

Intel shares, which gained 2.5 per cent to close regular trading at $21.48, rose 1.8 per cent in extended trading to $21.87.

Intel is the first big technology company to report its results for the fourth quarter.

The company is seen as a barometer for the PC market and technology spending in general.

"We're predicting that 2010 is a year of robust unit growth. I think it is continued strength in the consumer segment," said Stacy Smith, Intel's chief financial officer.

Smith said Intel had not yet seen signs that big companies were feeling freer to replace their old PCs, but he expected it to happen this year.

Intel issued an optimistic sign by saying that in the current quarter, it expects revenue from $9.3 billion (£5.7 billion) to $10.1 billion (£6.2 billion), and a gross profit margin of 59 per cent to 63 per cent.

Analysts had been predicting first-quarter revenue of $9.3 billion (£5.7 billion) and a gross margin of 59 per cent.

In the last quarter, Intel paid $1.25 billion (£764 million) to settle antitrust charges brought by Silicon Valley rival Advanced Micro Devices, the world's No 2 microprocessor maker.

That cut 22 cents from Intel's bottom line.

In the comparable period last year, Intel's earnings were hurt by a $1 billion (£611 million) charge for a reduction of the value of its investment in wireless networking company Clearwire Corp. That sliced 17 cents from the company's profit.