Infineon is Europe's second-biggest chipmaker

The company said net profits for the July to September period came in at 49 million euros (�30m).

That compared with a 506 million euro loss a year earlier, and a 116 million euro loss in the three months to June.

The figures, which reflect a resurgence in global demand for microchips, mark Infineon's first quarterly profit since June 2000.

Sales were also higher, climbing 37% on the year to 1.76 billion euros.

Cautious optimism

Infineon chief executive Ulrich Schumacher said he was cautiously optimistic that the firm would turn in a profit for the whole of its current financial year.

"From today's perspective, if market conditions remain steady, we are confident that we will generate a profit for the entire 2004 fiscal year," he said in a statement.

Investor reaction was lukewarm, with Infineon shares falling 2.2% by late morning.

Analysts said the market had been hoping for stronger profits, and was disappointed by the firm's cautious outlook report.

"These results are nothing to write home about," said Theo Kitz and Merck Fink Bank.

"The outlook is very guardedly optimistic, so it's not too bullish."

Infineon's return to profitability mirrors a wider trend in the global chip industry, with Korea's Hynix edging back into the black for the first time in six quarters last month.

The semiconductor industry has been hit hard over the past three years by the downturn the telecoms sector and other client industries.