UPDATE 2-Israel's Orbotech posts quarterly net loss

(Recasts, changes dateline, adds details and stock movement)

Aug 6 (Reuters) - Israel's Orbotech Ltd. ORBK.TA (ORBK.O) reported a quarterly net loss on weak sales of flat panel display products and guided its third-quarter revenue below analysts' expectations.

The company, however, expects the flat panel display market to rebound in 2008 and backed its revenue outlook for the year.

Shares of the company regained their losses after touching a year-low of $18.25 earlier in the day and were trading up more than 2 percent at $21.58.

Last month, the company had said the downturn in the flat panel display industry was steeper than expected and had cut its 2007 sales forecast for the sector.

Orbotech makes automated inspection systems for printed circuit boards (PCB) and flat panel displays (FPD).

"The good news, however, is that the anticipated upturn is likely to be stronger-than-expected," Chief Executive Rani Cohen said in a conference call with analysts.

In the call, the company said it continues to expect 2007 revenue of $345 million to $355 million. For the third quarter, it sees revenue of $77 million to $82 million.

Analysts are looking for $365.1 million in revenue for the year and $88.9 million for the third quarter, according to Reuters Estimates.

For the second quarter, it posted a net loss of $3.4 million, or 10 cents a share compared with a profit of $15.3 million, or 46 cents a share, a year ago.

Net loss in the second quarter included a $4.8 million write-off of high-end PCB inventory from a previous generation, and a $5 million write-off as the company decided against investing further in Negevtech Ltd.

Excluding these items, the company said it would have posted net income of $6 million, or 18 cents per share, which is in line with analysts' average estimates.

Revenue in the second quarter fell to $88.6 million from $104.9 million.

"Revenues are down because of the decrease in sales of flat panel display products. Last year flat panel display sales revenues were $117.5 million. For the year we only forecast sales of about $50 million, $30 million in the first half, and $20 million in the second half," Adrian Auman, vice president of finance and investor relations told Reuters.

"We will continue to invest in research and development in both the PCB and FPD industries and to explore possible external opportunities for expansion," Cohen added.

Orbotech in May bought New Systems, which develops and markets inkjet printing solutions for the bare PCB industry, and on Monday announced it had agreed to buy Danish Diagnostic Development, a maker of cardiac gamma cameras, for $39 million.

The company said the deal will be "immediately accretive on a non-GAAP basis, and add about $30 million to revenue on an annual basis." (Additional reporting by Lilla Zuill) (Reporting by Sergio Tjong-Alvares in Jerusalem and Manish Gupta in Bangalore)