Updated from Dec. 8 EST

Chipmaker

Altera

(ALTR) - Get Report

was hammered early Thursday after it ratcheted down fourth-quarter sales guidance after the bell Wednesday, citing a more severe decline in its communications segment.

Shares of Altera plummeted on the news, falling $1.78, or 8%, to $20.402 in premarket trading. The company's lower guidance contrasted with

higher sales targets issued last week by bellwether

Intel

(INTC) - Get Report

.

In its midquarter update, Altera said it now expects fourth-quarter revenue to decline about 9% to 12% sequentially, which would bring it to between $233 million and $241 million. That's a significantly steeper drop than the company forecast in October, when its guidance called for a sequential sales drop of 1% to 5% yet still fell short of analysts' estimates at the time.

The new guidance once again came in lower than expected by analysts surveyed by Thomson First Call, who most recently estimated that Altera would post fourth-quarter sales of $257.7 million and earnings per share of 15 cents.

Altera did not provide earnings guidance on Wednesday.

The company makes programmable logic chips, three-quarters of which are sold into the communications and industrial markets. Altera said that its communications segment is expected to decline more severely than previously predicted because of an inventory correction and slow end-markets in wireless and access products, particularly in Japan and Europe.

According to the company, total inventories will rise to about four months' supply on hand, up from prior guidance of 3.3 months to 3.7 months.

Altera also said computer and storage segment sales will decline. Its consumer segment will decline modestly, as the company previously forecast.

The one bright spot is Altera's industrial segment, which is expected to show an increase in sales in the fourth quarter -- an improvement over its previous forecast that called for flat growth.

Earlier Wednesday, Altera was among a group of seven stocks downgraded to sell ratings by Banc of America Securities analyst Sumit Dhanda. He wrote that revenue projections for the group do not appropriately reflect the magnitude of the inventory buildup and reduction of top-line growth rates and margins that will result from an extended inventory drawdown process.

Dhanda said he believes that a trough in utilization rates, which have been an indicator of a trough in stock prices, is not likely to occur until mid-2005.

Dhanda also downgraded

Analog Devices

(ADI) - Get Report

,

Actel

(ACTL)

,

Intersil

(ISIL)

,

National Semiconductor

(NSM)

,

Semtech

(SMTC) - Get Report

and

Xilinx

(XLNX) - Get Report

. (His firm has done investment banking with Altera, Actel, Analog Devices, Intersil, National Semiconductor and Semtech. Dhanda owns Intersil shares, and his associate holds shares of Analog Devices.)