Medtronic=s warning of earnings shortfall prompts fall in stock price.

Following Medtronic Inc=s forecast that revenues and earnings per share for its first quarter would be below company expectations and analysts' published estimates, the company=s stock price fell by about 10% at the beginning of August.

The US medical device manufacturer said constant-currency revenues grew 4% to about US$653 million in the quarter ended July 31 1998. Accordingly, diluted earnings per share are expected to be 32 cents, compared with 31cents for the first quarter last year, and 2 cents below the Wall Street consensus.

The company was planning to announce full first-quarter financial results on August 18.

Press reports suggest that Medtronic is coming under fire from its competitor Guidant Corp in the fast-growing heart defibrillator market. According to the Wall Street Journal, Medtronic and Guidant have been neck and neck= in both the US and worldwide markets.

Guidant has a dual-chamber defibrillator device, called the Ventak AV II, already on the US market. But Medtronic has such a device on sale only overseas.

The Medtronic device, called the GemJ DR, is not yet approved by the US Food and Drug Administration (FDA), but the company anticipates regulatory clearance of its Gem DR/SR defibrillators in its second quarter this autumn. AMedtronic expects significant revenue growth as new products, now winning rapid acceptance in international markets, are launched in the United States,@ said William George, Chairman and Chief Executive Officer. Along with the Gem DR defibrillator system, he also cited the advanced Kappa 7 700 pacemaker system, both of which are now gaining market share internationally.

AIt was a challenging quarter,@ George said, Abut we believe Medtronic is positioned for its full fiscal year to substantially surpass the $1.27 per share (before one-time charges) the company earned last year.@

For further information, contact: Chris O'Connell, Investor Relations, Medtronic Inc, 7000 Central Avenue, N.E., Minneapolis, MN 55432-3576, USA; tel: +1-612-514-4971; fax: +1-612-574-3464; Internet address: http://www. medtronic.com.