Aug. 25 (Bloomberg) -- Medtronic Inc., the world’s largest maker of heart-rhythm devices, said its profit fell 38 percent, on costs associated with a legal settlement and restructuring.

Net income fell to $445 million, or 40 cents a share, for the fiscal first quarter ended July 31, the Minneapolis-based company said today in a statement. Earnings excluding legal and restructuring costs were 79 cents a share, beating by a cent the average estimate of 24 analysts surveyed by Bloomberg.

Sales rose 6 percent to $3.93 billion benefiting from an extra week in the quarter compared with the year-earlier period, the company said. Medtronic Chairman and Chief Executive Officer William Hawkins, in his second year at the helm, is cutting $1 billion in costs through 2012 by eliminating more than 1,500 jobs and improving efficiencies amid slowing sales of pacemakers and defibrillators.

“A lot of people are going to come away from this quarter and say Medtronic has turned the corner, but I would just caution and say, ‘not so fast,’ because they had an extra selling week,” said Christopher Warren, an analyst with Caris & Co. in New York. “There is a lot that could be hiding in the cracks here.”

Medtronic fell 14 cents, or less than 1 percent, to $37.86, at 4:04 p.m. in New York Stock Exchange composite trading. The shares had declined 33 percent in the 12 months before today.

The company reaffirmed its earnings per share guidance for fiscal year 2010 of $3.10 to $3.20 when certain costs were excluded. It said it still expects sales to increase 5 percent to 8 percent in fiscal 2010.

“We feel it was a good, solid quarter,” Hawkins said in a telephone interview.

Legal Settlement

Medtronic agreed in July to pay $444 million to Abbott Laboratories to end more than a decade of litigation over the companies’ stents, medical devices that prop open heart arteries after they are cleaned of fat. Each agreed not to sue the other over stents and stent-delivery systems for at least 10 years.

Sales of spinal devices, used to treat herniated discs, scoliosis and spinal fractures, rose 7 percent from a year earlier to $915 million. Medtronic expanded its spinal-care unit in 2007 with its $3.81 billion purchase of Kyphon Inc. Rick Wise, an analyst with Leerink Swann in New York, had been expecting spinal sales of $894 million.

Sales of Medtronic’s cardiovascular unit, which includes the Endeavor stent that came on the market in February 2008, increased 9 percent to $689 million. Medtronic has been struggling to increase market share for Endeavor. Boston Scientific Corp. of Natick, Massachusetts, and Abbott Laboratories, of Abbott Park, Illinois, also began selling new stents in the U.S. last year.

The company increased its share of the global stent market to more than 20 percent, mostly driven by demand outside the U.S., Hawkins said.

Revenue from defibrillators and pacemakers, implantable devices that shock faulty hearts back into rhythm, increased 3 percent to $1.34 billion.

To contact the reporter responsible for this story: Shannon Pettypiece in New York at spettypiece@bloomberg.net.

Last Updated: August 25, 2009 16:10 EDT