In early trading here, shares in STMicro were showing a loss of 4.3 percent at 19.12 euros.

Late Wednesday STMicro said net profit fell to 79.5 million dollarsmillion euros) in the second quarter to June 28, down from 104.7 million in the same quarter of 2002, as margins remained squeezed by pricing pressure and a weak dollar.

STMicro said second-quarter revenues totalled 1.702 billion dollars, 11.2 percent higher from 1.531 a year earlier.

Gross profit was 607.3 million dollars, 5.5 percent higher from 575.8 million dollars a year earlier.

But looking ahead, STMicro president and chief executive officer Pasquale Pistorio said in a statement: "Pricing and currency trends have led us to revise our fourth-quarter gross margin target range to 36-37 percent, depending on revenue levels."

The forecast disappointed analysts.

JP Morgan analysts said in a research note: "STMicro reported in-line second-quarter revenues and gross margin, but missed our and consensus earnings forecast."

Separately, BNP Paribas analysts said they would cut their 2003, 2004 earnings estimates for STMicro following the company's warning on operating margins outlook.

"The recent gains on the stock were obviously overdone and we reiterate our caution on the semiconductor sector in general," they said in a research note.

SPACE.WIRE