Medtronic Inc (MDT.N) cut its full-year earnings forecast, hampered by weakness in key medical device markets, and said it would eliminate up to 2,000 jobs, sending its shares down 2 percent.

The world's largest medical device maker has struggled with slow sales as patients postponed treatments in the global economic downturn, and its share price has stagnated. It is also searching for a new chief executive to replace Bill Hawkins when he steps down at the end of April.

Everyone is focused on who the leadership is going to be, said Edward Jones analyst Aaron Vaughn. Until the new CEO comes in and articulates his plan, what we learned this morning is that the company is in the same straits it's been in for the last 24-36 months.

Some analysts and investors say Medtronic would benefit from a break-up of its divisions, separating its more mature cardiovascular businesses from faster-growing divisions that treat diabetes and manage pain, a move that management so far has rejected.

Medtronic Chief Financial Officer Gary Ellis told Reuters that investors will recognize the benefits of diversification in the long run.

We do believe there is a value in size and scale in this marketplace. There is an advantage in being diversified, being able to walk into a hospital with a broad portfolio of products, Ellis said in a phone interview.


Medtronic said it would take a one-time charge in the fourth quarter for the job cuts that could total up to 5 percent of its workforce. Company executives did not specify which areas were targeted for reductions, but said cuts would come in businesses and geographies where growth had slowed.

Medtronic expects full-year earnings of $3.38 to $3.40 a share, at the low end of its previously estimated range of $3.38 to $3.44 a share. It said its planned purchase of privately held Ardian Inc, maker of a catheter-based treatment for high blood pressure, would shave 2 cents from its results.

Medtronic's quarterly earnings per share exceeded analysts' average estimate, as tax benefits helped offset sluggish sales in key markets such as implantable cardioverter defibrillators and spinal products.

Net income in the third quarter ended January 28 was $924 million, or 86 cents a share, compared with $831 million, or 75 cents a share, a year earlier.

Analysts on average expected 84 cents a share, according to Thomson Reuters I/B/E/S.

Third-quarter revenue rose 3 percent to $3.96 billion.

Sales of cardiac rhythm disease management products -- the company's largest segment, which includes ICDs and pacemakers -- declined 2 percent to $1.22 billion.

Sales of spine products rose 2 percent to $861 million. Sales in emerging markets, which include China and Singapore, rose over 20 percent.

Medtronic also said it would restart the process of trying to sell its Physio-Control unit that makes automated external defibrillators, a business the company tried unsuccessfully to divest in the past.

Medtronic shares fell 84 cents to $40.43 in morning trading on the New York Stock Exchange.

(Reporting by Susan Kelly, additional reporting by Lewis Krauskopf in New York; Editing by Lisa Von Ahn, Derek Caney, Dave Zimmerman)