NEW YORK (CNN/Money) - Texas Instruments, a leading manufacturer of semiconductors used in cell phones, reported Monday that third-quarter profits more than doubled as sales grew nearly 13 percent. Shares surged more than 7.5 percent after hours on the news.

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Texas Instruments said net earnings jumped to $447 million, or 25 cents a share, in the quarter, including a gain of $106 million from a sale of Micron Technology stock as well as some restructuring charges. TI reported net income of $188 million, or 11 cents a share, in the third quarter of 2002.

Last month, TI said that it expected the net effect of these one-time events would be a 13-cent-per-share boost to earnings. So backing out that gain, TI reported earnings of 12 cents per share, three pennies higher than the First Call consensus estimate of 9 cents a share.

Sales came in at $2.5 billion, ahead of Wall Street's consensus estimate of $2.4 billion and up from $2.2 billion in the same period last year. The company raised the low end of its third-quarter sales and earnings guidance last month.

Shares of Texas Instruments (TXN: Research, Estimates) soared nearly $2 in after-hours trading, according to Island ECN. The stock rose 71 cents, or 2.8 percent, to $25.67 in regular trading on the New York Stock Exchange Monday. The stock is up more than 70 percent year-to-date.

The company appeared to benefit from improving demand for wireless phones. Although market leaders Nokia and Motorola have reported that prices for phones have fallen, shipments are increasing. To that end, TI said that sales of wireless chips increased 30 percent from a year ago and 22 percent from the second quarter.

During a conference call with analysts, TI Chief Financial Officer Kevin March said that the company is prepared for continued price drops in the wireless area and that TI will lower costs accordingly in order to maintain profit margins.

Broadband was also an area of strength for the company, with sales of chips for cable and DSL modems and wireless local area networks soaring 74 percent from a year ago and 11 percent from the second quarter.

Overall chip revenues increased 16 percent from a year ago and 10 percent sequentially. In another encouraging sign, the company said that chip orders totaled nearly $2.3 billion, up 29 percent from the same period last year and 21 percent from the second quarter.

In a written statement, TI Chairman Tom Engibous said that "the semiconductor market has rebuilt momentum."

TI has two other lines of business -- sensors and controls, and educational and productivity solutions. Sales in the sensors and controls division increased 2 percent from a year ago while educational and productivity solutions revenue (basically sales of calculators) slipped 2 percent. The two divisions combined accounted for about 17 percent of TI's total sales in the quarter.

The company also issued a very bullish forecast for the fourth quarter. TI said it expects sales to be in a range of $2.49 billion to $2.7 billion, with semiconductor sales expected to be between 3 percent and 12 percent higher than the second quarter. The current consensus estimate is $2.5 billion.

TI also said it expects earnings to be between 14 and 19 cents a share, well ahead of analysts' forecasts of 11 cents. The company left its capital spending plans for the year unchanged at $800 million but said that spending on research and development would be $1.75 billion for year, up from a prior forecast of $1.7 billion.

TI's good news comes on the heels of a similarly strong report from the world's largest chip manufacturer, Intel (INTC: Research, Estimates), last week.

Ted Parrish, co-manager of the Henssler Equity fund, which owns shares of Intel and TI, said TI's quarter was very solid and he was pleased to see the company's gross margins come in above 40 percent.

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TI's gross margins, which measure how profitable a company is after subtracting the cost of sales, were 40.7 percent in the quarter, up from 37.1 percent in the same period last year.

However, Parrish said valuations for chip stocks are starting to be a concern. Intel trades at 28 times 2004 earnings estimates and TI is trading at 38 times next year's profit projections.

"I'd be taking a cautious approach with semis. Even though they are performing well, the stocks aren't the cheapest," Parrish said.

And investors will need to keep an eye on continued pricing pressures in the cell-phone area. Alex Vallecillo, senior portfolio manager for National City Investment Management Co., said that price concerns facing the likes of Nokia and Motorola could eventually cause bigger problems for wireless chip suppliers such as TI, RF Micro Devices (RFMD: Research, Estimates) and STMicroelectronics (STM: Research, Estimates).

Still, it seems safe to say that there will be no Texas Instruments earnings massacre on Wall Street Tuesday.