UPDATE 3-Medtronic stumbles, profit misses Wall Street view

* Takes charges for litigation, inventory writedown

* Revenue rises 14 percent to $3.57 billion

* Lowers fiscal 2009 profit and revenue forecasts

* Shares fall 12 percent (Adds analyst comments, byline)

By Susan Kelly

CHICAGO, Nov 18 (Reuters) - Medtronic Inc (MDT.N) posted a 14 percent drop in quarterly earnings on Tuesday, due in part to a shortfall in spine product sales, prompting the company to cut its profit forecast and sending its stock down 12 percent.

Revenue and earnings came in below average Wall Street estimates as charges for a legal settlement and inventory writedowns also dragged on results.

Sales of the company's bone-growth protein, InFuse, contracted after U.S. regulators said the product was linked to life-threatening complications in spine repair surgeries in which it is not approved for use.

Medtronic said poor execution hurt its Kyphon spinal-fracture business, production problems dampened sales of neuromodulation devices and external heart defibrillators, and it lost market share in heart rhythm devices.

The missteps dismayed investors, who sent the company's shares to their lowest level in more than six years.

"Those things are more worrisome because they reflect operational problems versus macroeconomic problems that are beyond their control, and I think that's why they are getting hit. People are mad," said Tim Nelson, analyst at asset management firm FAF Advisors, which holds Medtronic shares in several funds.

But he said the stock sell-off was overdone given the modest reduction to the company's fiscal 2009 forecast.

Medtronic lowered its full-year earnings per share forecast to a range of $2.90 to $2.98 and its revenue forecast to $14.6 billion to $15 billion, saying it was comfortable with the midpoint of those ranges. The company had previously predicted earnings per share of $2.94 to $3.02 and revenue of $15 billion to $15.5 billion.

Medtronic, the world's largest stand-alone maker of medical devices, said net earnings were $571 million, or 51 cents a share, for the fiscal second quarter ended Oct. 24, compared with $666 million, or 58 cents a share, a year earlier.

Excluding one-time charges, the Minneapolis-based company earned 67 cents per share, 4 cents below analysts' average forecast, according to Reuters Estimates.

The charges included $229 million paid to Johnson & Johnson (JNJ.N) to settle stent patent litigation, and $40 million for a writedown of old inventory after a U.S. court ruled Medtronic could begin selling an alternative heart stent implant system.