There is no question our industry needs consolidation

Pasquale Pistorio STM chief exec

While the profits were much lower than a year ago, they represented a rise compared to the previous three months.

The semiconductor industry has been badly hit by over-capacity arising from the slump in demand for personal computers.

And the firm's chief executive, Pasquale Pistorio, said that his firm would seek further consolidation opportunities in order to ride out the bad times.

"There is no question our industry needs consolidation...ST has the capabilities and financial strength to participate in this process," said Mr Pistorio.

"We want to acquire value not glamour," he added, highlighting the US and Japanese markets for potential acquisitions.

Worse to come

Profits at the Franco-Italian firm rose to $45m in the three months to December compared to $35.8m during the previous quarter.

STM sales were also brisker during the fourth quarter, even though full year sales were 19% lower.

But the Mr Pistorio also hinted that his firm had not necessarily seen the worst of the downturn.

Mr Pistorio forecast that sales in the first three months of the year would fall between three and seven percent.

And he said that the firm's gross margins would not bottom out until the first quarter of 2002.

Analysts were disappointed at a news conference on Wednesday that STM did not express any concrete signs of an industry recovery from the year-long slump.

And STM stock was down 1.6% to 33.48 euros in the first hour of trading.