UPDATE 2-STMicro defends group's unity after breakup report

* STMicro spokesman declines to make further comment

* STMicro has said plans new strategic plan in December

* Shares pare gains, up 6 percent

(Rewrites with company comments)

By James Regan and Valentina Caiazzo

PARIS/MILAN, Oct 12 (Reuters) - Europe's top semiconductormaker STMicroelectronics denied planning a demerger,saying it had no plans to undo the group's "unity" in responseto a report that it planned a breakup which had sent its sharesup by nearly a fifth.

Bloomberg had reported that STMicro was considering areorganisation that could involve it being split up into itsanalog and digital businesses, and possibly selling itsstruggling mobile phone chip venture.

"STMicroelectronics denies the existence of initiativeswhich can compromise the unity of the company," STMicro said ina brief statement.

A spokesman declined to elaborate on the statement, whichcame as the group prepares to unveil a strategic plan inDecember to address softer demand and the changing needs of itscustomers.

Shares in STMicro pared their earlier gains, trading up 6percent at 4.655 euros in Paris by 1317 GMT. In Milan, the stockwas up 5.8 percent. The stock was 6.7 percent higher inpre-market trading in New York .

JPMorgan analyst Sandeep Deshpande said the shares had risenon hopes of splitting the analog and digital businesses as theformer were funding losses at the latter.

"If the two assets were separated, then the analog assetswould find a much higher value due to their profitability,"Deshpande said. "The investor hope is that a trade buyer wouldthen fund the losses associated with the digital assets and theywould not be borne by STMicro investors."

NEW PLAN

STMicro shares, which had jumped to a six-month high beforethe company's statement, were trading in volumes representingfive times their daily average over the past three months.

STMicro, which makes chips for mobile phones and computers,said last month it would unveil a plan in December with the aimof continuing to accelerate its adoption of a new financialmodel, "taking into account the changed market environment andsome specific customer dynamics".

Bloomberg cited Samsung Electronics as apotential buyer for STMicro's digital assets, which couldinclude its ST-Ericsson chip joint venture with Ericsson.

The sale would allow the company to focus on itssemiconductors business, the news agency said.

STMicro and Ericsson said on Tuesday they had brought in anadvisor on strategy for ST-Ericsson.

ST-Ericsson made an operating loss of $235 million in thesecond quarter as it suffered from a collapse in demand forphones from clients Nokia and Sony Ericsson.

STMicro, which competes with Analog Devices Inc andTexas Instruments Inc , had said in July that the globaleconomic environment had weakened.

($1 = 0.7726 euros)

(Additional reporting by Dominique Vidalon and Blaise Robinson;Editing by David Holmes)

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Keywords: STMELECTRONICS BREAKUP/