* Sees Q2 rev flat to down 4 pct sequentially
* Cuts gross margin outlook to about 51 pct from 55 pct
* Shares down over 17 pct
June 14 (Reuters) - Shares of chipmaker Lattice Semiconductor fell 17 percent to a two-year low after the company cut its second-quarter revenue and margin outlook, prompted mainly by a shaky semiconductor market in Europe.
The company, which competes with Altera Corp and Xilinx Inc, now expects revenue to be flat to down 4 percent sequentially, implying sales of $71.7 million to $69.5 million in the quarter.
The maker of customized programmable chips and associated software had earlier expected second-quarter revenue to be flat to up 4 percent sequentially.
Analysts were expecting second-quarter revenue of $73.5 million, according to Thomson Reuters I/B/E/S.
The company had earlier cut its revenue outlook for the third and fourth quarters, primarily because of weakening demand in its communications business.
Last week, rival Altera affirmed its second-quarter forecast of a sequential revenue growth of 14 percent to 18 percent.
Lattice, whose chips are used in communications, computing, industrial, consumer and automotive industries, also lowered its forecast for second-quarter gross margin to about 51 percent from 55 percent.
Shares of the Hillsboro, Oregon-based company, which have lost a quarter of their value in the past three months, fell 78 cents to $3.71 in early morning trade on Thursday on the Nasdaq.