* Sees Q3 revenue outlook up 4-8 pct sequentially
* Says inventory correction largely behind it
* Q2 adj EPS $0.40 meets; revenue misses
* To repurchase up to $500 mln shares
* Shares up 11 pct after market
BANGALORE, Aug 19 (Reuters) - Chipmaker Marvell Technology Group Ltd (MRVL.O) forecast strong revenue growth in the third quarter, despite a tough hard-drive market, as it came out of an inventory overhang, sending its shares up 11 percent.
The company, whose chips are used in devices from hard drives to smartphones, more than tripled its second-quarter earnings, which met Wall Street estimates as strength at its wireless market offset the recent weakness in the hard-drive industry.
The slowdown in the hard-drive market was highlighted by weak forecasts from Seagate (STX.O) and Western Digital WDC.N.
Hard-drive maker and Marvell's largest customer Western Digital represented about 24 percent of the company's revenue in fiscal 2010, while Toshiba (6502.T), Japan's biggest chipmaker, contributed about 15 percent.
The company -- whose rivals include LSI Corp LSI.N, Broadcom (BRCM.O), Intel (INTC.O) and STMicroelectronics (STM.PA) -- expects its third-quarter revenue to grow 4-8 percent sequentially.
"We think this is a surprisingly bright outlook, given weakness in the PC space and disappointing reviews of RIM's BlackBerry Torch," Morningstar analyst Brian Colello said.
Marvell's chips are used in smartphones such as Research in Motion's RIM.TO BlackBerry and China Mobile's (0941.HK) OPhone.
On a conference call with analysts, the company said its second quarter was tough as a softening economy hurt demand for PCs, leading to excess inventory in the supply chain.
Net income for the second quarter ended July 31 rose to $219.8 million, or 33 cents a share, from $58.5 million, or 9 cents a share, a year earlier. Excluding items, it earned 40 cents a share. Revenue rose 40 percent to $896.5 million.
Analysts expected earnings of 40 cents a share, excluding items, on revenue of $906.8 million, according to Thomson Reuters I/B/E/S.
"We're encouraged that the company reined in its operating expenses and met its EPS targets," Colello said.
Wall Street was expecting a miss, Morgan Keegan analyst Harsh Kumar said.
Revenue from the mobile and wireless market rose more than 50 percent sequentially and over 140 percent year over year. However, total revenue missed market expectations.
"Top-line results were disappointing, but not shocking," Morningstar's Colello said.
Shares of Marvell were up $1.65 at $16.56 in heavy volumes after the bell. They closed at $14.91 Thursday on Nasdaq.
The stock has lost 25 percent in the last six months, underperforming a 4 percent drop in the Philadelphia Semiconductor Index .SOX. (Reporting by S. John Tilak in Bangalore; Editing by Vinu Pilakkott)