Jan. 29 (Bloomberg) -- Infineon Technologies AG, Europe's second-biggest maker of semiconductors, reported its first profit in eight quarters because of increased demand for chips used in MP3 players and personal computers.

Net income in the three months ended in December was 120 million euros ($155 million), or 15 cents a share, after a loss of 183 million euros, or 25 cents, a year earlier, Infineon said in a statement. Sales surged 27 percent to 2.13 billion euros.

Record iPod music player sales, of which Apple sold 21.1 million in the quarter, and Microsoft Corp.'s new Windows operating system spurred orders for memory chips. In the current quarter, Infineon's Qimonda memory unit may face falling prices.

``Earnings were mainly boosted through Qimonda and that's dangerous,'' said Malte Schaumann, an analyst at SES Research GmbH in Hamburg, who advises investors buy Infineon. ``Demand for memory chips will slow down again, so all of Infineon's other units need to become profitable as fast as possible.''

Infineon shares rose 10 cents, or 0.9 percent, to 11.19 euros in Frankfurt, after rising as much as 3.4 percent earlier today. The stock gained 43 percent in a year, more than twice the gain of Germany's benchmark DAX Index.

Earnings Swings

Qimonda, which accounts for about half of Infineon's revenue, last week reported a first-quarter profit of 177 million euros after a loss of 127 million euros a year ago, as sales surged 73 percent. Chief Executive Officer Wolfgang Ziebart wants to eventually lower the stake in Qimonda to less than 50 percent to break free from earnings swings at the unit.

Qimonda became a legally independent division in May and raised $546 million in an initial public offering in August.

Overall profit at Infineon, based in Neubiberg near Munich, was seen at 89 million euros and sales at 2.31 billion euros in a Bloomberg News survey of 11 analysts.

``In a challenging operating environment, results for the first quarter came out better than originally expected,'' Ziebart said. Infineon can ``look forward to the coming quarters with full confidence.''

Excluding Qimonda, Infineon's first-quarter loss before interest and taxes shrank to 9 million euros from 174 million euros in the fourth quarter.

Benq Mobile Collapse

The company expects charges of about 15 million euros in each of the last three quarters of the fiscal year, Ziebart told journalists at a conference call today. Infineon still aims to make all units profitable by the end of September, except the wireless unit, which is scheduled to break even by the end of the year, Ziebart told analysts at a conference call.

Infineon's communications unit, which makes chips used in phones, lost 57 million euros, while the automotive and industrial unit earned 55 million euros. The two units will form Infineon's remaining business after the memory chips retreat.

The chipmaker is seeking new orders after Benq Mobile, Infineon's largest client, ran out of cash last year and started liquidating this month. The collapse forced Infineon to cut 400 jobs and delay some profit goals. Costs tied to Benq Mobile's insolvency will be ``significantly lower'' than the 30 million euros Infineon had originally anticipated, the company said.

`Not Immune'

For the fiscal second quarter, Infineon expects sales and earnings before interest and tax excluding Qimonda and before the inclusion of expenses, to remain ``at least flat'' compared with the preceding three months, the company said.

Infineon and Qimonda may face falling memory-chip prices this quarter, analysts said.

Qimonda and Infineon are ``not immune from price pressure'' in the memory chip market, UBS analyst Jonathan Dutton said in a note on Jan. 24. A recent slide in dynamic random access memory prices may signal ``the start of seasonal DRAM price weakness,'' he said. DRAM chips are the main memory for personal computers.

To contact the reporter on this story: Simon Thiel in Munich at sthiel1@bloomberg.net;

Last Updated: January 29, 2007 11:55 EST