SANTA CLARA, Calif. -- Despite flat microprocessor sales, weak European PC demand, and a series of manufacturing problems, Intel Corp. here today reported sales of $8.7 billion in the third quarter ended Sept. 30, up 19% from a year ago. But as expected, Intel's sales were up only 5% from last quarter--with its profit picture even worse than originally expected.

And, the company's fourth quarter of this year could also be a gloomy event, as it projects that its worldwide sales will only grow 4% to 8% over the third period of 2000.

In the third quarter, meanwhile, net income, excluding acquisition-related costs, was $2.9 billion, or $0.41 a share, up 52% from the same period of 1999 but down 18% sequentially. The company was projected to report a net income of about $0.38 a share, according to estimates from the First Call/Thomson Financial group.

The company reported both good and bad news for the quarter. "We achieved record revenue with 19% growth in the third quarter," said Craig R. Barrett, president and chief executive. "It was a challenging quarter primarily because PC demand in Europe was not as strong as we expected entering the period."

In September, Intel stunned the market by saying its third-quarter revenues will be below expectations, primarily due to weak computer demand in Europe (see Sept. 22 story).

The company projected its revenues for the third quarter to be approximately 3-to-5% higher than in its sales in the second quarter. Financial analysts had been expecting Intel's sequential revenue growth to be nearly three times that amount, pushing the company's sales well over $9 billion in the third quarter.

In the second quarter, Intel's revenues totaled $8.3 billion, which was a 4% increase from $8.0 billion in the first three months of this year. Intel reported a net income of $3.5 billion in the second-quarter period, and while releasing those record results, the company said it expected business to strengthen in the second half of 2000.

In addition to the gloomy results, Intel has experienced problems on other fronts. Last month, for example, it re-shuffled its microprocessor management team in an effort to address a number of manufacturing problems and product delays encountered by the company (see Oct. 10 story).

It's unclear if these problems hurt the company's bottom line. In the third period, however, the company reported flat growth in its core processor business. But it did report strong sales of PC chip sets and motherboards.

The company also reported stronger-than-expected demand for its flash-memory and networking-chip products, but it showed weak demand for computer telephony system-level items.

Going forward, Intel appeared to be more optimistic. "Looking ahead, we anticipate record revenue in the fourth quarter, with growth across most of our product lines," said Barrett. "We are especially pleased with the rapid growth in our server business, our record flash business, and our networking silicon business which surpassed our expectations in the third quarter," he added.