UPDATE 2-Analog Devices beats, shares slide on weak margins

* Q3 EPS $0.22 from continuing ops vs Street view $0.20

* Q3 revenue $491.9 mln vs Street view $479.5 mln

* Sees Q4 EPS $0.24 to $0.26 from continuing operations

* Sees Q4 revenue about $510 mln to $530 mln

* Shares down 5.2 pct after hours

SAN FRANCISCO, Aug 18 (Reuters) - Chipmaker Analog Devices Inc (ADI.N) posted better-than-expected quarterly results on Tuesday because of cost cuts and strength in the automotive, consumer and industrial markets, but shares slid 5.6 percent after hours as margins fell short of estimates.

The company, which competes with Broadcom Corp (BRCM.O), Freescale Semiconductor, Texas Instruments Inc (TXN.N), and STMicroelectronics NV (STM.PA) to design and manufacture chips for cars, video game consoles, defense equipment and mobile phone transmitters, blamed higher demand for cheaper products for the sharp drop in profit margins from a year ago.

"While revenues were up, we didn't get the product gross margins to move higher, or as high as we had expected," said Broadpoint Amtech analyst Doug Freedman.

Analog Devices posted a third-quarter gross margin of 54.1 percent, while Freedman said he had been expecting a gross margin of more than 55 percent. Gross margins were also far behind the 61 percent the company posted a year ago.

Chief Executive Jerald Fishman told investors on a conference call that margins had bottomed during the quarter.

"We believe that third quarter gross margins represent a trough for this cycle, and anticipate a gradual improvement in gross margins going forward," Fishman said.

Analog Devices' third-quarter net profit fell 53 percent to $65.5 million, or 22 cents a share, compared with $138.6 million, or 47 cents a share a year ago.

Revenue fell 25.3 percent to $492 million from $658.9 million a year ago, and beat the average analyst estimate of $479.5 million.

Analog Devices forecast fourth-quarter earnings of 24 cents to 26 cents per share from continuing operations, above average analyst forecasts of 23 cents, according to Reuters Estimates.

Shares of Norwood, Massachusetts-based Analog Devices closed up 1.72 percent at $27.22 on the New York Stock Exchange, but traded down 5.2 percent at $25.80 after hours. (Reporting by Clare Baldwin. Editing by Robert MacMillan, Bernard Orr)