Intel Corp's quarterly results met Wall Street's expectations as it faces a tough PC market, and the chipmaker said it was sharply increasing its capital expenditures in an apparent bid to speed up its entry into tablets and smartphones.

Intel warned last month that the damage wrought by flooding in Thailand - the world's largest producer of computer drives - would curtail December-quarter earnings in a PC market already hit by weak demand.

Adding to its troubles, Intel has failed to find a foothold in smartphones and tablets, where processors based on ARM Holdings' power efficient chip designs are widely used.

Rushing to speed up its development of competitive chips for smartphones and tablets, Intel said it would boost capital expenditures in 2012 to $12.5 billion, plus or minus $400 million. Last year its capital expenditures were $10.7 billion.

The biggest surprise is the capex for the new year, said Evercore Partners analyst Patrick Wang. They're investing to catch up and not only be at parity but exceed where the handset incumbents are.

Lenovo and Motorola Mobility have agreed to use Intel's new Medfield chip in upcoming smartphones, and investors are keen to see how the new devices do with consumers.

Intel had a gross margin of 64 percent in the fourth quarter, with a non-GAAP gross margin of 65 percent. Analysts on average expected 64.6 percent.

After flooding in Thailand ruined factories and sensitive machinery, shortages of the components are expected to persist through the first half of 2012 and disrupt PC production.

Intel said revenue in the current quarter would be $12.8 billion, plus or minus $500 million. Analysts on average had expected current-quarter revenue of $12.770 billion, according to Thomson Reuters I/B/E/S.

The world's leading chipmaker said revenue in the fourth quarter was $13.9 billion, up 21 percent and slightly higher than the $13.718 billion expected.

GAAP net income in the fourth quarter was $3.4 billion, up 6 percent. GAAP earnings per share were 64 cents. Analysts had expected 61 cents.

Shares of Intel were unchanged after its earnings report from a close of $25.63, up 0.95 percent on Nasdaq.

(Reporting by Noel Randewich; Editing by Gary Hill)

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