Chipmaker Intersil Corp cut its third-quarter sales outlook but investors took the warning in their stride as the company signalled a recovery in bookings with customers beginning to burn through their inventory.

Shares of the company, which had already warned in July of a weak third quarter, rose marginally in what could be a positive sign for an embattled industry. The stock has dropped 16 percent since it gave the outlook for the quarter.

People are buying because they had assumed something much worse and it's not as bad as they had thought it would be. It's an expectations game, Morgan Keegan and Co analyst Harsh Kumar told Reuters. I won't be surprised a bit if more than 85 percent of semiconductor companies start to guide down.

Rivals Fairchild Semiconductor , Altera and Texas Instruments have all said they would log lower-than-expected sales for the quarter as the economic slowdown stifles stifling demand for products that use its chips.

Intersil makes power management chips that are used in flat panel displays and DVD players -- a segment hit most as customers cut back on discretionary spending -- and industrial products such as medical imaging devices.

We now see signs that inventory is stabilizing, with bookings likely recovering to consumption rates during the remainder of the third quarter, said Chief Executive Officer Dave Bell in a statement.

Bell's comments provide a ray of hope to an industry that makes chips for everything from smartphones to computers. Chipmakers are struggling with falling PC sales and have raised concerns over slowing technology spending as fears grow of another recession.

Intersil cut its revenue forecast for the current quarter to $184-$188 million from its prior view of $205-$213 million. Analysts were expecting third-quarter revenue of $209 million, according to Thomson Reuters I/B/E/S.

Shares of the Milpitas, California-based company were trading up about 4 percent in extended trade after they closed at $10.65 on Monday on Nasdaq.

California California Management