Intel earned $1.9 billion in the third quarter or 31 cents a share, up 43% year-over-year, on record revenues of $10.1 billion, up 15% - way better than the $9.6 billion that Wall Street expected and way better than Intel had guided to. Its operating income was up 64% to $2.2 billion.

Intel described it as its highest sequential growth in 10 years and said demand was "exceptional," a product of a "strong general market." Nearly 80% of its revenues were generated outside the US.

By comparison AMD lost 71 cents on revenues $1.6 billion.

Intel's closely watched gross margin, crushed in Q2 to 46.9%, returned to a more normal 52.4%, a fact Intel attributed to higher MPU volumes, lower 45nm start-up costs and lower processor unit costs, partially offset, it said, by write-offs on manufacturing costs related to upcoming 45nm parts that didn't qualify for sale during the quarter and so couldn't be classified yet as inventory.

The number fell where Intel said it would last month when it offered a surprise mid-quarter update like it used to, conveniently just as AMD was rolling out its long-awaited Barcelona quad.

It suggests that maybe the price wars have abated.

Intel CFO Andy Bryant said Q3's beautiful execution was not the end of Intel's recovery, merely a "milestone."

Its restructuring, for instance, continues with the company expecting to shed another 2,000 jobs this quarter, bringing headcount down by 10,000 this year alone, more than it indicated last year when it realized that it had to pull up its socks and retrench. In December the total roll call should stand at about 88,000 people. Evidently there's still more trimming to come.

Intel said total processor units going out the door in Q3 set a record and that ASPs were flat; chipsets and flash memory units set records; and motherboard units were lower. It called out laptop and server chips and said they were collectively up 14%, with related chipsets and other products up 19%.

However, it looks like laptop revenues specifically were up 30% year-over-year to $3.9 billion on the back of the company's new Santa Rosa line and servers were up 12%.

In a taut to AMD whose delayed Barcelona chip is barely out of the gate, Intel, which has now met and passed AMD's server lead, said it shipped upwards of two million quad-cores in Q3. Although not all of them were server chips, chip groupie Nathan Brookwood said the number indicates how badly AMD was hurt by its failure to execute.

It was "very, very costly," he said.

If AMD had turned up in Q1 with a 2.5GHz Barcelona, like it was supposed to, it would have probably gotten a goodly share of that harvest, Brookwood said, but turning up in September with only a 2GHz quad means it's "only catching up with Intel's heels."

It is still unclear exactly what design issues AMD wrestled with but Brookwood calculates that it took it four turns before it was on solid ground.

Intel said ASPs for desktops improved and credited it to higher-end chips moving.

It's also walked away from business that wasn't profitable, it said.

Intel is expecting Q4 revenues to land between $10.5 billion and $11.1 billion with a gross margin of ~57% - ahead of the Street. That should give it a gross margin of 52% for the year, a point better than it previously thought it could clear. Intel starts shipping 45nm parts code named Penryn next month.

At this point Intel can't make widgets fast enough. Bryant said inventories at both Intel and its distributors were lower than he'd like and if Q4 demand exceeded his calculations, well, people could go begging.

Intel CEO Paul Otellini said he had seen no evidence of any double booking as some of the Wall Street analysts have imagined and when asked about the impact of the credit crunch quoted a San Jose Mercury News article in which people who were asked what they wanted for Christmas put a PC before happiness and world peace.

Well, at least a PC is attainable.