CORRECTED - UPDATE 2-Yahoo ad revenue falls, shares down

(Corrects 2nd bullet point to say "Q2 EPS 10 cents" instead of "Q2 adjusted EPS 10 cents"; error also appeared in UPDATE 1))

* Q2 revenue down 13 pct from year ago to $1.57 bln

* Q2 EPS 10 cents vs Street's 8 cents

* Q2 net revenue $1.14 billion in line with Street

* Sees Q3 revenue $1.45 bln to $1.55 bln

* Shares down 2.6 pct (Recasts with ad revenue, adds details on revenue, analyst comment)

SAN FRANCISCO, July 21 (Reuters) - Yahoo Inc's (YHOO.O) revenue from advertising fell and the Internet company projected lower-than-expected operating cash flow for the current quarter, sending its shares down more than 2 percent.

Second-quarter revenue plunged 13 percent to $1.57 billion from a year ago as advertisers remained tight-fisted.

Excluding traffic acquisition costs -- the portion of revenue that is shared with Yahoo partners -- Yahoo earned net revenue of $1.14 billion, in line with the average of analysts' expectations, according to Reuters Estimates.

Revenue from search advertising fell 15 percent from the year-ago quarter, while display advertising revenue fell 14 percent.

"We're in challenging times in all of the sectors within advertising, including online," said Ross Sandler, an analyst at RBC Capital markets. "These guys are being disproportionately hit by overexposure to premium display, which has been an area that has been especially weak."

Yahoo's revenue was in line with his estimate, but "a little bit lighter" than what Wall Street was expecting, Sandler added.

Yahoo projected that income from operations in the current quarter will range between $55 million to $65 million, down from $76 million in the second quarter.

The company forecast operating cash flow at $330 million to $370 million, compared with the average analyst forecast of $413.5 million, according to Reuters Estimates.

"Looks like guidance is a little light for the third quarter," said Colin Gillis, an analyst at Brigantine Advisors. "But she (CEO Carol Bartz) is probably moving it to the game of 'guide light and beat.'"

Yahoo posted net income of $141 million, or 10 cents a share, compared with net income of $131.2 million, or 9 cents a share, at this time last year. Analysts, on average, were looking for earnings of 8 cents a share.

Shares of Yahoo fell 44 cents, or 2.6 percent, to $16.31 from their $16.75 close on the Nasdaq. (Reporting by Alexei Oreskovic and Anupreeta Das; Editing by Gary Hill)