(Bloomberg) ? Tyco International Ltd. the Bermuda- based conglomerate that is separating into three, posted a 12 percent first-quarter profit gain, helped by lower taxes, and projected smaller-than-expected second-quarter earnings.

Profit from continuing operations rose to $807 million, or 39 cents a share, from $721 million, or 34 cents, Tyco said in a statement this week. Revenue in the quarter, which ended on December 31, rose 1.1 percent to $9.71 billion. The company beat its own 38 cent profit forecast made last month.

Chief executive officer Edward Breen reiterated forecasts for the year after raising investments in research at Tyco?s health-care unit during the quarter. Profit fell at all four of Tyco?s units. Recalls hurt revenue growth at the health-care division, while weaker demand from corporate customers pressured security division sales and margins for fire products.

The full-year forecast ?looks like a stretch,? Credit Suisse analyst Nicole Parent, who has a ?neutral? rating on the stock, said in a note to investors this week. ?Given that Tyco management will be focused on the break-up transaction, rather than operations, we cannot rule out additional estimate revisions downward.?

Tyco said it expects second-quarter earnings per share of 40 cents to 42 cents. Analysts had estimated 47 cents a share for the quarter, based on the average forecast of 14 surveyed by Thomson Financial. The company cited lower margins at the fire and security unit coupled with higher costs from health-care product recalls.

The shares fell 60 cents, or 2.3 percent, to $25.50 at 8:01 a.m. before the start of New York Stock Exchange composite trading. They are down 14 percent since the day before Breen announced the breakup of the company on January 13.

Tyco will have costs of $450 million in the second quarter because of settlements related to legal matters, including health care. In the first quarter, health-care research and development rose by $24 million in the quarter.

A Thomson representative couldn?t be reached to give details of the projections. The company reiterated its forecast of $1.85 to $1.92 a share for the year ending September 30. The forecast excludes costs related to the breakup, which may total $1 billion.

In the first quarter, Tyco paid $262 million in taxes, down from $306 million a year earlier. The previous year?s quarter also included $161 million in costs for early debt payments. Profit from continuing operations in the 2005 first quarter was 41 cents a share, excluding some items. At Tyco?s health-care division, the world?s second-biggest maker of syringes and other disposable medical products behind Johnson & Johnson, profit suffered amid higher costs. Tyco in December recalled its NeutroSpec radiology imaging agent in the US after it was linked to two deaths. The company?s diaper business is suffering from slow growth in the US, Breen said.

?Many consider the health-care segment to be the crown jewel, and the negative outlook suggests Tyco?s proposed breakup value may be lower than previously expected,? New York-based Morgan Stanley analyst Scott Davis, who has an ?overweight? rating on the stock, said in a note to investors last month.

Tyco?s fire and security division, the world?s biggest maker of burglar alarms through its ADT unit, was hurt by weakness in commercial security and lower margins at fire services, spokeswoman Sheri Woodruff said.

Free cash flow, a measure used by analysts to determine a company?s financial health, was $230 million in the quarter, including about $120 million in payments for legal matters. Sales at businesses owned at least a year rose 3 percent in fiscal 2005, short of Breen?s goal of 4 percent to 6 percent, Breen told investors on a January conference call. Breen, 49, will stay with the company to run its fire, security and valves units.

Breen, who cut net debt in half since taking over the company, also replaced most of top management and the board.

Tyco Healthcare?s brands include US Surgical and Kendall. It also owns the world?s biggest maker of generic acetaminophen, the active ingredient in Tylenol.

The electronics unit is the largest maker of connectors used by automobile makers and includes the brands AMP and M/A Com.

Breen was named Tyco?s CEO in 2002 to replace Dennis Kozlowski, who is in jail for looting the company. Before his conviction, Kozlowski had attempted to break up Tyco under a proposal drafted by Goldman, Sachs & Co. That plan was later withdrawn amid scepticism among investors about Tyco?s accounting and management.