UPDATE 2-Knoll Q3 tops market, sees Q4 sales flat sequentially

* Sees sequentially higher operating expenses for Q4

* Q3 shr $0.13 vs. est $0.11

* Q3 rev $181.3 mln vs est $174.7 mln

* Shares fall 9 pct (Recasts, adds conference call comments, share movement)

BANGALORE, Oct 15 (Reuters) - Office furniture maker Knoll Inc (KNL.N) posted better-than-expected quarterly results on lower operating expenses, but forecast sequentially flat fourth-quarter sales, sending its shares down more than 9 percent.

Fourth-quarter results will be impacted by an increase in operating expenses as it plans to accelerate the placement of its latest brand of Generation work chairs, the company said on a conference call with analysts.

Knoll said its 'Generation' chairs started commercial production in the third quarter and expects to ship about 2,000 of them to dealers in October.

The new product will be a "meaningful contributor" to its results in the years ahead, the company said in a statement.

Chief Financial Officer Barry McCabe said the company is seeing some signs of stabilization in its incoming orders and demand, though business conditions are not improving.

Knoll, along with its peers such as Steelcase Inc (SCS.N) and Herman Miller (MLHR.O), has been hit by weak demand, high office vacancies and corporate downsizing resulting from the weak economy.

EARNINGS FALL

Knoll said its third-quarter earnings fell 76 percent to $5.7 million, or 13 cents a share, while sales fell 36 percent to $181.3 million.

The quarter included restructuring charges of $110,000.

Analysts on average had expected earnings of 13 cents per share, on revenue of $174.7 million, according to Thomson Reuters I/B/E/S.

"Our strategy of diversifying our sources of revenue into high design content business continued to buffer our results," Knoll said in a statement.

Knoll's third-quarter operating expenses fell 30 percent to $44.3 million.