UPDATE 2-EBay results beat Street, shares up

* Q2 adjusted EPS 37 cents vs Street view 36 cts/shr

* Q2 revenue $2.1 billion vs Street's $1.99 billion

* Sees adjusted Q3 EPS 34-36 cents, Street view 35 cts

* Shares rise more than 3 pct (Adds analyst's quote, details of results, byline)

By Alexandria Sage

SAN FRANCISCO, July 22 (Reuters) - Ebay Inc (EBAY.O) posted better-than-expected quarterly results as it managed to slow the deterioration in its main online auctions and retail business, sending shares up more than 3 percent.

The company also gave a third-quarter profit forecast on Wednesday in line with analysts' estimates.

In the second quarter, gross merchandise volume or the total value of goods sold, excluding vehicle sales, fell 10 percent, less than the 16 percent decline in the first quarter.

"I think the gross merchandise volume beat," said RBC Capital Markets analyst Stephen Ju. "That's an incremental, directional improvement people have been looking for."

EBay also includes Web payments unit PayPal and Internet telephone company Skype, which it is trying to spin off.

Second-quarter net profit was $327.3 million, or 25 cents per share, compared with $460 million, or 35 cents per share, a year earlier.

Excluding one-time items, eBay earned 37 cents per share, a penny above the 36 cents per share expected, on average, by analysts, according to Reuters Estimates.

Revenue fell 4 percent to $2.1 billion, above the $1.99 billion, or 9 percent drop, expected by Wall Street. The company's marketplaces division saw a 14 percent drop in revenue while sales in fast-growing PayPal rose 11 percent.

In the marketplaces division, the revenue drop slowed sequentially from the prior quarter. Still, the effects of currency exchange rates had a negative effect since more than half that revenue comes from outside the United States.

Sluggish growth at eBay's marketplaces division, which began with online auctions but now encompasses classifieds, fixed price sales and shopping sites, has kept shares of eBay pressured, and the company has pointed to fast-growing PayPal as its future growth driver.

Operating margins fell to 19.6 percent in the quarter from 24.8 percent a year earlier, the company said, because of the effect of the stronger U.S. dollar against foreign currencies.

EBay said it expected third-quarter adjusted earnings per share in a range of 34 to 36 cents per share, compared with the 35 cents per share expected by Wall Street.

Shares in eBay rose 3.3 percent to $20.10 after closing on the Nasdaq at $19.45. (Reporting by Alexandria Sage; Editing by Gary Hill)