NEW YORK (CNN/Money) - Intel Corp., the world's largest semiconductor manufacturer, posted better-than-expected earnings and sales for the fourth quarter on Tuesday.

Intel earned $1 billion, or 16 cents a share, in the fourth quarter on sales of $7.2 billion, surpassing Wall Street estimates of earnings of 14 cents and sales of $6.9 billion. Intel wound up posting year-over-year gains in earnings and sales as well. In the fourth quarter of 2001, Intel posted earnings of 15 cents a share and revenues of $7.0 billion.

"2002 ended with a strong quarter," Craig R. Barrett, Intel chief executive officer, said in a news release.

Intel, like other technology companies, has been struggling during the prolonged economic downturn. But Intel's problems have been compounded by the fact that its fortunes are heavily tied to the rapidly maturing personal computer industry.

Shares of Intel (INTC: Research, Estimates) gained 2.4 percent to $17.79 in regular trading on Nasdaq in anticipation of the earnings report. And the stock initially shot up to a high of $18.10 in after-hours trading, according to Island ECN, but has since settled down to about $17.92.

One possible reason for the pullback was that Intel said in its release that it expects sales for the first quarter to come in at a range of $6.5 billion to $7 billion. The low end of this guidance is slightly lower than the current Wall Street consensus estimate of $6.6 billion. Intel recorded sales of $6.8 billion in last year's first quarter.

The company does not provide guidance for earnings. Analysts currently expect Intel to report earnings of 13 cents a share in the first quarter of 2003, 13 percent below the first quarter 2002 results of 15 cents a share.

It also appears that Intel is continuing to take a guarded view toward 2003. To that end, Intel announced that its capital spending for the year is expected to be between $3.5 billion and $3.9 billion. Intel's capital expenditures in 2002 were $4.7 billion.

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This news sent shares of several semiconductor equipment companies that Intel buys from, including Applied Materials (AMAT: Research, Estimates), Novellus Systems (NVLS: Research, Estimates) and KLA-Tencor (KLAC: Research, Estimates), down in after-hours trading. For more about stocks moving in after-hours trading, click here.

Intel also said that it expected research and development expenses of $4.0 billion for the year, flat with 2002. Michael Cohen, director of research for Pacific American Securities, a boutique research firm that does no investment banking, says that Intel is still in a "belt-tightening" mode, and that the company will continue to keep a strong eye on costs in order to boost earnings.

But there were some encouraging signs as well. In a conference call on Tuesday evening, Intel President and Chief Operating Officer Paul Ottelini noted that the average selling price of microprocessors used in personal computers was higher in the fourth quarter than in the third quarter.

Intel has been involved in an occasionally bitter pricing war with arch rival Advanced Micro Devices. AMD (AMD: Research, Estimates) will report its latest quarterly results after the closing bell on Thursday.

Ottelini added that there were some anecdotal signs of improving corporate demand for microprocessors but nothing strong enough to indicate a broad recovery just yet.

For the full year, Intel reported revenue of $26.8 billion, up 1 percent from 2001. Earnings per share, excluding acquisition related costs, were 52 cents, down 2 percent from a year ago. The company announced that it would begin to use earnings figures including acquisition costs in the first quarter. Including these costs, Intel's earnings were 46 cents a share.

In addition, Intel said that it expects gross margins of about 50 percent in the first quarter, compared with 51.6 percent in the fourth quarter of 2002. For the full year, the company predicted gross margins of 51 percent. Gross margins were 50 percent in 2002.

Intel's shares plunged more than 50 percent in 2002 but have rebounded sharply so far this year on hopes that revenues and earnings will bounce back. The stock is up 14 percent year to date.