Intel said Tuesday it swung to a loss in the second quarter as a result of a $1.45 billion charge stemming from a European Union fine in May, but the chip maker reported higher quarter-to-quarter sales as the result of an improving PC market.

In releasing earnings for the quarter ended June 30, Intel said it expects the PC market to continue to get better in the second half of the year.

"Intel's second-quarter results reflect improving conditions in the PC market segment with our strongest first- to second-quarter growth since 1988 and a clear expectation for a seasonally stronger second half," Paul Otellini, president and chief executive of Intel, said in a statement.

Revenue for the quarter fell $1.4 billion, or 15%, from the same period last year, to $8 billion. Compared to the first quarter, however, sales were up 12%, or by $879 million, beating Intel's "informal" outlook in April of flat sales compared to the first quarter's $7.1 billion.

As a result of the $1.45 billion EU fine for anticompetiitive practices, Intel posted a loss for the quarter of $398 million, or 7 cents a share, compared to a profit of $1.6 billion, or 28 cents a share, a year ago.

When the EU fine is factored out of the results, Intel "did amazingly well," Leslie Fiering, an analyst for Gartner, told InformationWeek. The company beat Wall Street expectations and showed that it has brought its inventory under control after seeing levels rise. In the second quarter, inventories were down by $240 million.

Intel's overall results "should help install some confidence in the PC market," Fiering said. "It doesn't mean we're recovering with a big R, but we have a leading indicator showing that we're trending in the right direction."

Despite the positive results, analysts have said that Intel will have trouble keeping average selling prices up as consumers and businesses look for PC bargains that use less expensive chips.

Indeed, in the second quarter, ASPs were down from the first quarter. Prices were driven downward to a large degree by Intel Atom microprocessors, used in low-priced netbooks. Atom processors and chipsets were up 65% to $362 million.

For the third quarter of this year, Intel forecast revenue of $8.5 billion, plus or minus $400 million, and an increase in gross margin to 53%, plus or minus 2 percentage points. Gross margin in the second quarter was 50.8%.

In imposing its massive fine, the EU found that Intel kept its smaller rival Advanced Micro Devices out of competition for contracts by paying computer makers not to use its products. The fine was the largest in EU history and more than double what the governing body's regulators imposed on Microsoft in 2004 for its anti-competitive practices. Intel has said it would appeal the fine.

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