Medtronic Inc., buoyed by stronger-than-expected sales of implantable defibrillators, earned $77 million on revenue of $3.4 billion in the third quarter, slightly beating analysts' estimates.

A year ago, Medtronic earned $710 million on revenue of $3.1 billion, but earnings dropped this year because of a 56-cent-per-share charge that mostly went for costs in two lawsuits and for charges related to last year's acquisition of Kyphon, which makes spinal products.

Excluding charges and other one-time items, Medtronic earned $713 million, or 63 cents per share, compared with an analyst consensus of 61 cents a share. Medtronic suggested that analysts may want to raise their annual earnings estimates by the 2 cents by which the company beat third-quarter expectations.

The market reaction was mixed. Medtronic shares closed Tuesday at $49.15 a share, up 3 cents, then fell 10 cents in after-hours trading to $49.05.

The Kyphon acquisition, announced in July, closed in the third quarter. Medtronic said $290 million in acquisition-related charges was in the range it had expected. The $275 million charge for legal actions involved settling lawsuits in the recall of 87,000 Marquis implantable defibrillators in 2005, and a reserve in a 1997 lawsuit with Cordis Corp., a subsidiary of Johnson & Johnson.

Analysts also said the charges weren't surprising, and they focused instead on the good results for implantable cardiac defibrillators, which help control dangerously fast heartbeats.

Medtronic reported third-quarter implantable defibrillator sales of $726 million, an indication to analysts that the company had successfully weathered the October recall of its Sprint Fidelis lead, an electrical wire connecting the debrillator to the heart.

Medtronic said it had minimized lost sales by rapidly switching its manufacturing and distribution operations over to an alternate lead, called Quattro.

"By being able to quickly engineer that transition from the Fidelis to the Quattro, Medtronic appears to have kept their customers pretty loyal and unfazed," said Phil Nalbone, an analyst at RBC Capital Markets in San Francisco. "They gracefully sidestepped what could have been a serious product-reliability issue."

Steve Alexander • 612-673-4553

3RD QUARTER FY2008, 1/25

2008 2007 % chg. Revenue $3,405.0 $3,048.0 +11.7 Income* 77.0 710.0 -89.2 Earn/share 0.07 0.61 -88.5 9 months

Revenue $9,655.0 $9,019.0 +7.1 Income* 1,418.0 1,990.0 -28.7 Earn/share 1.24 1.71 -27.5 Figures in millions except for earnings per share.

* 3rd quarter non-GAAP net earnings and diluted earnings per share were $713 million and $0.63 per share. Non-GAAP net earnings and diluted earnings per share for the nine month ended Jan. 25 were $2,090 million and $1.82 per share, compared with $2,030 million and $1.75 for the nine months ended Jan. 26, 2007.