UPDATE 2-Riverbed Q2 tops Street; sees Q3 above view

* Q2 adj. EPS $0.25 vs est. $0.22

* Q2 rev $126.2 mln vs est. $119.4 mln

* Sees Q3 EPS $0.27 vs est. $0.24

* Shares up 3 pct after market (Adds outlook, executive comments, share movement)

BANGALORE, July 22 (Reuters) - Riverbed Technology Inc RVBD.O posted better-than-expected second-quarter results spurred by growth in product revenue, and guided its third quarter above Street, sending its shares up 3 percent after the bell.

The company, which provides technology that speeds up applications over networks, projected third-quarter earnings of 27 cents a share, excluding items, on revenue of $132 million to$136 million.

Analysts were looking for earnings of 24 cents per share, on revenue of $126.39 million, according to Thomson Reuters I/B/E/S.

The company expects sales to continue to ramp in the second half of the year, chief executive Jerry Kennelly said in a conference call with analysts.

“Exiting the first half of 2010, we are poised to exceed our growth rate achieved in 2009, a period in which our revenue growth outpaced most technology peers,” he added.

The company said it expects gross margins of 76 percent to 78 percent, roughly flat with the second quarter.

After the results, S&P analyst Ari Bensinger upgraded the stock to “hold”, saying that the networking equipment was experiencing a solid rebound in demand from the enterprise sector.

“While we still see a lagging recovery in Europe, we do not see weakness pronounced enough to impact strong operating trends in other geographies,” he added.

Bensinger raised his price target on the stock by $10 to $33.

On Wednesday, rival F5 Networks reported a quarterly profit above Street expectations and projected a strong close to the year. [ID:nSGE66K0L0]

For the second quarter, Riverbed reported net income of $6.6million, or 9 cents a share, compared with a net loss of $0.3 million, or break even a share, a year earlier.

Excluding items, it earned 25 cents a share.

Revenue for the company, which competes with Cisco Systems CSCO.O and Blue Coat Systems BCSI.O, rose 39 percent to $126.2 million.

Product sales rose more than 40 percent, marking its fourth consecutive quarter of product revenue increase, the company said in a statement.

Analysts were looking for earnings of 22 cents a share, excluding items, on revenue of $119.38 million, according to Thomson Reuters I/B/E/S.

Shares of the San Francisco-based company were trading up 3.4 percent at $32.50 after the bell. They closed at $31.41 Thursday on Nasdaq. (Reporting by Mansi Dutta in Bangalore; Editing by Vyas Mohan)