UPDATE 1-Smith Int'l qtrly profit up but shrs tumble

(Recasts first paragraph, changes dateline from NEW YORK, adds details, share price)

HOUSTON, Jan 29 (Reuters) - Smith International Inc (SII.N) on Tuesday reported a 17 percent increase in its fourth-quarter profit, but the results fell short of Wall Street expectations sending the oilfield services company's shares down 11 percent.

Flooding in Mexico and a drop in the number of rigs working in shallow waters in the U.S. Gulf of Mexico are among the factors that weighed on the Houston company's profit margins.

The company said its fourth-quarter net income rose to $167.0 million, or 83 cents per share, from $143.0 million, or 71 cents per share in the year-ago quarter. Revenue rose to $2.3 billion from $2.0 billion.

Analysts surveyed on average had expected a profit of 88 cents per share, according to Reuters Estimates.

Chief Executive Officer Doug Rock said in a statement that $3.70 to $3.80 per share would be a "reasonable" expectation for earnings in 2008. For 2008, Wall Street had expected a 2008 profit of $4.00 a share, according to Reuters estimates.

Shares of Smith skidded $6.92 lower to $55.12 in morning trading on the New York Stock Exchange. (Additional reporting by Ritsuko Ando) (Reporting by Anna Driver in Houston)