UPDATE 1-Microchip Q1 profit view tops Street, ups sales view

* Sees higher margins, reduced costs

* Sees Q1 EPS $0.17 to $0.18 excluding items

* Sees Q1 sales up 8 to 10 pct sequentially

* Sees Q1 GAAP gross margins of about 49.1 to 49.5 pct

June 9 (Reuters) - Chipmaker Microchip Technology Inc (MCHP.O) forecast first-quarter profit above market estimates and raised its sales outlook for the period, helped by cost control, increased margins and growing backlog position.

"Both our direct and distribution businesses have performed well. Geographically, Asia has shown the most strength while Europe has been the weakest," Chief Executive Steve Sanghi said in a statement.

For the quarter ending June 30, the company expects to earn about 12 cents to 13 cents per share. Excluding special items, it forecast a profit of 17 cents to 18 cents per share.

Microchip, which had earlier expected quarterly net sales of $182 million, or up about 5 percent sequentially, now sees sales growing 8 percent to 10 percent from the fourth quarter.

Analysts on average were expecting the company to earn 14 cents a share, before special items, on sales of $182.2 million, according to Reuters Estimates.

For the first quarter, the company forecast gross margins of about 49.1 percent to 49.5 percent on a GAAP basis.

"We currently expect our gross margin for the September quarter to be up as much as 200 basis points from the June 2009 quarter," CEO Sanghi said.

Shares of the company closed at $21.77 Monday on Nasdaq.

For the alerts, double-click here. [ID:nWNAB7881]. (Reporting by Deepti Govind in Bangalore; Editing by Gopakumar Warrier)