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By Sarah Knight
FRANKFURT, July 24 (Reuters) - German electronic and engineering group Siemens AG said on Wednesday it expected fourth-quarter earnings to be weaker than the previous quarter amid a slump in new orders in the three months to June.
The group said in a statement that orders fell 20 percent in the third quarter of its fiscal year, with its previously booming power station unit seeing a 50 percent slump.
By 0842 GMT, Siemens shares were down 6.5 percent at 46.85 euros, dragging down the bluechip German DAX which fell 4.84 percent. The Dow Jones European tech index fell 7.15 percent.
"The outlook is simply bad, and when you look at the order intake it is really bad," said Frank Rothauge, an analyst at Sal. Oppenheim in Frankfurt. "It's all very well that Power had good profit figures, but the order intake has halved."
Falling telecom sales and earnings have dragged down Siemens over the last year, while sales in power generation, medical technology and other areas have been buoyant. Now the cushion from power generation may be coming to an end in the next few years as booming demand for turbines in the United States fades.
The group's telecoms equipment business was hit by a sharp drop in demand from carriers, particularly for switches and broadband access equipment.
Siemens said earnings before interest and tax (EBIT) fell to 892 million euros ($883.2 million) for the three months ended June 30 from 919 million the previous quarter but were up from a loss of 479 million euro a year ago, when it took hefty charges.
The figure, which was higher than analysts expected, was buoyed by a strong performance at power generation, medical solutions, automation and drives and its light-bulb unit Osram.
Group sales fell four percent to 20.48 billion euros.
The company stuck to aggressive operating margin targets for 2003 and 2004 but said the way ahead was tough, adding to the negative outlooks of its technology rivals who have reported recently.
The group was "pursuing previously announced earnings targets despite the challenging fourth quarter and extremely difficult market conditions," Chief Executive Heinrich von Pierer said in a statement.
The company did not provide a more detailed outlook. It has said it expects a "clear improvement in earnings this year" from 2001's net income of 624 million euros before special items and goodwill amortisation.