April 24 (Bloomberg) -- 3M Co., the maker of 50,000 products from Scotch-brand tape to electronic signs, said first-quarter net income fell 28 percent and that a slowing U.S. economy is starting to hurt sales. 3M declined in New York trading.

Net income dropped to $988 million, or $1.38 a share, from $1.37 billion, or $1.85, from a year-earlier quarter that benefited from the sale of a business, the St. Paul, Minnesota- based company said today in a statement. Revenue rose 8.9 percent to $6.46 billion. The results beat analysts' average estimates.

Sales grew eight times faster overseas than in the U.S., where Chief Executive Officer George Buckley said he expects demand for products such as Post-it Notes to soften this year. Analysts said 3M results were boosted by currency translations were considered and that operating margins at an electronic- displays unit missed their estimates.

``People are pretty worried about how big of a bite the economic weakness is going to take,'' said Dan Ortwerth, an Edward Jones & Co. analyst in St. Louis who has a ``buy'' rating on 3M. ``They're worried about a free-fall in the optical films business too, and they're both weighing heavily on the stock.''

3M spans multiple industries including home and automotive repair supplies, office items and materials, making it an economic touchstone for some investors.

``They've got a breadth of product lines'' instead of focusing only on ``big-ticket'' goods, Bill Batcheller, who helps manage $85 million in assets including 3M shares at Butler Wick & Co. in Youngstown, Ohio.

3M is raising prices ``wherever we can'' to counter the effect of higher commodity costs and slowing U.S. demand, CEO Buckley said. Consumer sales ``finally mirrored the experience seen by U.S. retailers and other suppliers in that market,'' he told analysts on a conference call today.

Estimates

3M fell $1.50, or 1.9 percent, to $79.13 at 4:01 p.m. in New York Stock Exchange composite trading. The stock has risen 2.8 percent in 12 months.

The company was predicted to earn $1.35 a share on sales of $6.35 billion, the average estimates in a Bloomberg analyst survey. Results in the year-earlier quarter were aided by $422 million in proceeds from the sale of the pharmaceutical business.

The company repeated its forecast for 2008 earnings growth of at least 10 percent, or about $5.48 a share, based on 2007 profit of $4.98, excluding special items. Analysts, on average, project earnings of $5.45 a share.

Orders from Asia and Latin America buoyed sales of respirators and other safety products, while demand for abrasives lifted 3M's industrial and transportation unit, its largest. Currency translation helped overseas revenue grow 13 percent, eight times faster than in the U.S. The dollar slumped 15 percent against the euro on average in the quarter from a year earlier.

Organic Growth

Currency translation added 6.1 percent to sales results, and analysts said that overshadowed slow growth at existing businesses. ``Organic growth in total was disappointing,'' Deutsche Bank Securities Inc. analyst David Begleiter wrote in a note to clients today.

Revenue rose at five of the company's six divisions. Sales dropped 5.9 percent to $871 million at the Display and Graphics unit, which makes materials for flat-screen televisions, computer monitors and mobile phones.

The unit has an operating margin of 21.5 percent and may not meet 3M's 2008 target of at least 24.5 percent, Scott Davis, an analyst with Morgan Stanley in New York, wrote in a report.

``The company's LCD television film business is becoming commoditized even faster than we forecast,'' Davis wrote in a note today. He has an ``overweight'' rating on 3M and was predicting an operating margin of 26 percent.

Sales of optical film, used to improve the image on flat- screen displays, ``will continue to play out for the rest of the year,'' Chief Financial Officer Patrick Campbell said.

Move to Asia

CEO Buckley moved the optical systems division to North Asia from St. Paul in March to be closer to customers. The division has faced pressure to improve profit margins amid competition. He also named a new vice president to lead the optical systems division last month.

``We are vigorously driving our costs and introducing new cost-competitive films to deliver better value to our customers,'' Buckley said. ``This is still an enormous market with enormous potential.''

Industrial and transportation sales climbed 17 percent to $2.09 billion on demand for abrasives and automotive repair products. Safety-unit revenue rose 13 percent to $859 million, and demand for dental and orthodontic supplies lifted health sales by 12 percent, to $1.08 billion.

Sales rose 9.2 percent for the communications unit and 2.6 percent for the consumer and office division.

A collapse in housing prices has caused U.S. economic growth to slow. Foreign demand for U.S.-made durable goods helped American factories weather a collapse in new-home sales to the lowest level in almost 17 years last month, U.S. economic reports indicated today.

To contact the reporter on this story: Courtney Dentch in New York at cdentch1@bloomberg.net.

Last Updated: April 24, 2008 16:08 EDT