UPDATE 2-China's Sohu profit jumps; plans unit IPO

(Adds stock move, executive comment)

July 28 (Reuters) - Chinese media company Sohu.com Inc (SOHU.O) posted higher-than-expected second-quarter results as brand advertising revenue soared on the back of the Beijing Olympic Games, and it forecast a strong third quarter.

Sohu also announced plans for an initial public offering of its online games unit, Changyou.com Ltd.

Quarterly profit rose nearly seven-fold to $40.2 million, or $1.02 a share, from $5.7 million, or 15 cents a share, a year earlier. Excluding share-based compensation expense, earnings were $1.07 a share.

Excluding a tax provision, Sohu earned 92 cents a share, surpassing analysts' average forecast of 70 cents, according to Reuters Estimates.

Revenue rose 162 percent to $102 million. Analysts had forecast $97.2 million.

Sohu shares were down $1.61 to $81.21 in late-morning Nasdaq trade.

"The strong momentum we achieved in the second quarter was mainly the result of our distinct portal strength, our execution of our Olympic strategy, and the marketing campaigns across China," Chief Executive Charles Zhang said on a conference call.

Sohu, which said its portal saw a 64 percent rise in average unique visitors during the second quarter, is vying with the likes of Shanda (SNDA.O) and Sina.com (SINA.O) in a $1.3 billion Chinese Internet market. Experts estimate the market is a tenth the size of the U.S. market but expect it to grow as much as 50 percent this year.

For the third quarter, Sohu forecast profit of $1 to $1.05 a share excluding share-based compensation expense, which is expected to reduce earnings by 6 cents to 7 cents a share.

Beijing-based Sohu, which means "search fox" in Chinese, forecast revenue of $112 million to $116 million.

Analysts expect earnings of 72 cents a share, before special items but including share-based compensation, on revenue of $107.4 million.

Sohu plans to submit a registration statement to the U.S. Securities and Exchange Commission regarding a possible initial public offering of its online games business unit, Changyou, the company said in its earnings news release.

The number and price of the American Depositary Shares to be offered have not yet been determined, Sohu said.

The IPO would enable Sohu to concentrate on its core online media, search and mobile services, while Changyou would focus on online games. Sohu would remain the majority shareholder in Changyou, it said.

Sohu said it would undertake the IPO "as market conditions permit." (Reporting by Varsha Tickoo in Bangalore; additional reporting by Paul Thomasch in New York; editing by David Cowell and John Wallace)