* Suspends dividend to pay down debt
* Reports 21 cent shr loss vs St estimate for EPS of 3 cents
* Sales rise, but miss estimates
* Shares plunge in premarket trading
By Dhanya Skariachan
NEW YORK, July 25 (Reuters) - U.S. consumer electronics chain RadioShack Corp RSH.N reported a surprising quarterly loss on Wednesday as increased demand for lower margin mobile handsets squeezed margins.
The retailer also decided to suspend its dividend to use some of that cash to pay down near-term debt. Its shares plunged 31.5 percent to $2.50 in premarket trading.
RadioShack's net loss was $21 million, or 21 cents a share in the second quarter, compared with net income of $24.9 million, or 24 cents a share, a year earlier.
Analysts on average were looking for a profit of 3 cents a share, according to Thomson Reuters I/B/E/S.
Sales rose about 1.2 percent to $953.2 million, but missed the analysts' average estimate of $970.4 million.
Earlier this week, UBS downgraded RadioShack to "sell" from "neutral," saying questions about the retailer's strategic direction, vacancies in key executive positions, and an uncertain capital outlook would weigh on the stock. [nL4E8IO3JJ]
(Reporting By Dhanya Skariachan; Editing by Maureen Bavdek)
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