Updated from 6:29 p.m. EDT

STMicroelectronics ( STM), the leading European chipmaker, posted sharply higher second-quarter profits after the close Wednesday but delivered sales a little short of expectations, citing order push-outs and testing problems.

Net income of $148 million marked an 86% increase from last year's levels. On a per share basis, earnings amounted to 16 cents, in line with Wall Street expectations and up from 9 cents a year ago.

Geneva-based STMicroelectronics (ST) said net revenues for the quarter ending in June totaled $2.17 billion, up 28% from last year's levels. That's slightly below the consensus estimate for $2.20 billion.

Gross margin stood at 37.4%, up from 35.7% a year ago.

In a statement, Chief Executive Officer Pasquale Pistorio said the company saw a 13.2% sequential increase in gross profit on a 7% sequential revenue gain. He said gross margin was higher than ST expected, helped by higher utilization rates and other manufacturing efficiencies.

He added that quarterly revenues "could have been higher, had it not been for some order push-outs in the computer peripherals market and short-term testing bottlenecks affecting our ability to ship certain products."

ST said second-quarter sequential revenue growth was broad based, with four out of its five targeted market segments showing gains. The automotive, consumer, and industrial markets were the strongest contributors to growth, in line with the company's expectations.

Telecom, including wireless and networking ASICs application specific integrated circuits , was up over 2004 first quarter levels, but softness in hard disk drive applications caused the computer chip segment to post a moderate sequential decline, the company said in a prepared statement.

Also, flash memory chip sales increased 9.7% sequentially to $304 million.

ST projected third-quarter revenues will increase 2% to 8% from the prior quarter, implying sales in the range of $2.22 billion to $2.35 billion, compared to the consensus estimate for $2.31 billion. The guidance equates to a year-over-year revenue increase of 23% to 30%.