UPDATE 2-LeapFrog Q3 view lags Street

* Q2 loss at $0.20/shr vs est loss of $0.22/shr

* Q2 sales up 26 pct at $62.4 mln

* Sees 2010 EPS at $0.20-$0.30 vs est $0.24

* Expects to be profitable in Q3, Q4 of FY10

* Raises lower-end of 2010 rev growth view to 15 pct (Recasts, adds details, analyst comment and updates stock activity)

By Shobhana Chadha

BANGALORE, July 26 (Reuters) - Educational toy maker LeapFrog Enterprises Inc (LF.N) posted a narrower-than-expected loss, helped by sales of its newly launched touch-screen device Leapster Explorer, but forecast weak third-quarter profit, sending its shares down 4 percent.

The company, which competes with larger rivals Mattel Inc (MAT.O) and Hasbro Inc HAS.N, said it sees third-quarter net income between 12 cents a share and 18 cents a share. Analysts on average were expecting earnings of 30 cents a share for the third quarter, according to Thomson Reuters I/B/E/S.

"It's a holiday-driven company and toys sell predominantly in the fourth quarter. The third-quarter guidance may have come in a little light, but I am not concerned about the third quarter," Analyst Edward Woo of Wedbush Securities said.

For the second quarter ended June 30, the company reported a net loss of $12.6 million, or 20 cents a share, compared with a net loss of $12.2 million, or 19 cents a share, a year ago.

Revenue for the company, which sells interactive learning toys and books covering subjects from math to music, rose 26 percent to $62.4 million.

Analysts on average expected a loss of 22 cents a share, before items, on revenue of $60.5 million.

Gross margin for the second quarter fell to about 36 percent from about 38 percent a year ago.

"In the fourth quarter and beyond, we expect gross margin to benefit from a higher mix of software sales, including Leapster Explorer software," CFO Mark Etnyre said in a statement.

For 2010, the company sees gross margin between 41 percent and 43 percent.

Shares of the company, which have fallen 30 percent in the last 3 months, were trading at $5.36 in after-market trade. They closed at $5.40 Monday on the New York Stock Exchange. (Reporting by Shobhana Chadha in Bangalore; Editing by Roshni Menon)