The investment will take the form of convertible notes - bonds that can be changed for shares at a later date.

KKR's investment, which will also see it nominate a director to Sun's board, came as Sun reported a profit of $126 million for its second fiscal quarter - compared with a net loss of $223 million for the same quarter last year - its first results above expectation since mid-2005.

The Santa Clara-based company, already buoyed by a deal with Intel announced earlier this week, said that revenues for the quarter were up 7 per cent year on year to $3.6 billion on the back of strong sales of its Sparc chips and increased acceptance of its Solaris operating system.

KKR's investment was an "opportunistic" transaction that wasn't brought on by any pressing need, and could be used to fund acquisitions, Jonathan Schwartz, Sun's chief executive, said in a briefing.

The announcement of Sun's results - along with Intel's 11 per cent rise in revenues, reported last week - was a sign of the mixed fortunes of late within the semi-conductor industry, which has seen other chip-makers hit hard.

AMD, Intel's rival, reported a fourth-quarter loss - its first since 2005 - largely because of a $550 million charge stemming from its $5.4 billion purchase of ATI Technologies, a maker of graphics technology.

AMD's profit was down 77 per cent from the same quarter a year ago.

Meanwhile STMicroelectronics, one of Europe's largest chipmakers, was downbeat about its forecasts for 2007, despite posting a 51 per cent rise in net profit for the fourth quarter.

The Geneva-based company said that profit rose to $276 million from $183 million in the same quarter a year ago, but gave warning that first-quarter activity could see a weakness in demand for its telecoms products, as well as a deceleration in the wireless market.

AMD's shares dropped 0.1 per cent in normal trading yesterday, but fell a further 4.3 per cent in after-hours trading after the release of its results. Sun shares closed at $5.66, but gained 8.3 per cent after hours following the release of its fourth-quarter earnings, closing at $6.13.

Sun has recently increased its share in the market for servers on which companies host their IT systems and websites - a market that AMD supplies but in which Intel has recently boosted its performance.

The announcement this week that Intel will supply chips to Sun's servers will put further pressure on AMD, which has already had to reduce its profit margins after strong pricing pressure.

The reduced margins at AMD reflected the cost of absorbing ATI, which may eventually help AMD to improve its chips, although the acquisition could affect profit for several quarters, analysts said.

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