UPDATE 2-Diller's IAC posts lower Q2 profit; buying more shrs

* Q2 shr $0.02 after adjustments

* Q2 rev $340 mln versus Street view $333.7 mln

* Announces buyback of 20 mln shrs; stock up 1.3 pct (Adds share buyback, analyst comment, stock move)

NEW YORK, July 29 (Reuters) - Barry Diller's Internet media company IAC/InterActiveCorp (IACI.O) posted weaker-than-expected quarterly earnings on Wednesday, hurt by the downturn in advertising on its websites, but said it plans to buy back about 15 percent of its stock.

IAC, which owns search engine Ask.com and dating site Match.com, posted second-quarter adjusted earnings of $3.3 million, or 2 cents a share, compared with $25.5 million, or 17 cents a share, in the period a year ago.

Excluding a loss related to the sale of its stake in Arcandor AG, profit was 7 cents a share. That result, however, fell short of the analysts' average expectation for adjusted profit of 9 cents a share.

Revenue surpassed expectations. It fell 4 percent to $340 million, but was ahead of the analysts' view of $333.7 million, according to Reuters Estimates.

Shares of the company rose 1.3 percent, helped by the announcement of additional stock repurchases.

Answering Wall Street's desire for the company to either pay out its stockpile of cash as a dividend or buy back stock, the company has repurchased about 17.4 million shares of stock between April 27 and July 24.

The company had approximately $1.9 billion in cash and marketable securities, and $95.8 million in long-term debt as of June 30, it said.

IAC said on Wednesday its board has authorized the repurchase of another 20 million shares. Analysts said that represented about 15 percent of its stock.

"With the new share buyback authorization, IAC could repurchase roughly 25 percent of shares outstanding in 2009," said John Blackledge in a research report.

Blackledge said the move "ties into our thesis for the company, given its large cash position, IAC can repurchase a significant amount of its stock for returns well above its cost of capital and at the same time mitigate acquisition concerns."

As for its businesses, IAC, like other media companies, continues to struggle with the sharp downturn in advertising.

In IAC's main media and advertising business, which includes properties like Ask.com and Dictionary.com, revenue fell 10 percent in the quarter, reflecting the broader downturn in ad spending that is hurting the industry.

Shares of IAC were up 23 cents at $18.14 on the New York Stock Exchange.