UPDATE 1-Ubisoft cuts targets as Nintendo DS sales fall

* Q2 sales to drop 54 pct

* Fiscal FY sales target cut to 1.04 bln eur from 1.1 bln

* Sees operating margin of 7 percent, down from 11 percent (Adds detail)

PARIS, July 27 (Reuters) - French video games company Ubisoft Entertainment (UBIP.PA) cut its earnings targets for the fiscal full year as sales of Nintendo DS games have dropped faster than expected.

The company now sees fiscal 2009/10 sales of around 1.04 billion euros, down from its previous forecast of 1.1 billion, it said in a statement on Monday. Current operating income will be at least 7 percent of sales, instead of at least 11 percent.

Ubisoft said the revised targets mainly reflect the performance in the first half and reiterated its goal for 23 percent sales growth in the second half.

"We are currently experiencing a very sharp slowdown in our sales for Nintendo DS as well as sales of back-catalogue titles in the context of a market that is tougher than anticipated," Chief Executive Yves Guillemot said.

Ubisoft is postponing the release of several major games but hopes interest in titles such as Assassin's Creed 2, Splinter Cell Conviction and Avatar will help it achieve "strong growth" in the second half, Guillemot added.

Fiscal first-quarter sales dropped 51 percent to 83 million euros, Ubisoft said, below its own guidance of 95 million.

It expects second-quarter sales to drop 54 percent to around 80 million euros. It had previously forecast quarterly sales of 130 million.

Nintendo DS accounted for 26 percent of Ubisoft sales in the fiscal first quarter, down from 37 percent a year earlier, whilst Wii contributed 20 percent, up from 11 percent. (Reporting by James Regan; Editing by Marcel Michelson)