(Bloomberg) ? Bermuda-based Tyco International Ltd., the world?s biggest maker of fire and security systems, reduced its profit forecast, overshadowing investor enthusiasm about chief executive officer Edward Breen?s plan to split the conglomerate into three.

Tyco?s shares tumbled 11 percent, the most in almost three years, after Breen said there was little or no sales growth last quarter in the Pembroke company?s fire, security and health-care units. He cut forecasts for the third time in a year.

Revenue at Tyco?s existing businesses last year rose at half the pace of the company?s top target, Breen said. He?s been struggling to generate sales and profit growth in the past three years from the hundreds of companies cobbled together by his predecessor, L. Dennis Kozlowski, who?s now jailed for looting Tyco. Breen will spin off electronics and health-care units in the first quarter of 2007. They will be based in Bermuda for tax purposes.

?Investors are disappointed with the reduced earnings guidance and the company commentary was vague as to why it occurred,? said Peter Bates, an analyst with Baltimore-based T. Rowe Price & Associates, which owns more than 19.7 million Tyco shares. ?Investors are also disappointed that the spinoff will take a year.?

Shares of Tyco, run from West Windsor, New Jersey, dropped $3.19 to $27.12 in New York Stock Exchange composite trading. That?s the biggest decline since March 2003. Beforehand, the stock had climbed 11 percent since Breen proposed the breakup in November, giving the company a market value of more than $60 billion.

Sales and margins at the fire and security business are being hurt by weakness in the commercial security and fire services, Tyco said. Product recalls and compliance matters weighed on revenue and profit at health care.

?Investors will be disappointed by the lowered profit outlook and the extended time to complete the transaction,? John Inch, an analyst in New York at Merrill Lynch & Co., wrote in a note to clients today. ?In hindsight, it appears that this transaction is being pursued from a ?hand? of incremental fundamental weakness.? He rates the shares ?neutral.?

Tyco?s fiscal first-quarter profit from continuing operations, excluding some costs, was about 38 cents a share. It had forecast profit of 40 cents to 42 cents on that basis. Results for the quarter will be released on February 2.

?The biggest issue to me actually was growth,? Breen said on a conference call with analysts and investors. ?That?s really the thing we looked at.?

For the full year, the company now expects earnings on that basis of $1.85 to $1.92 a share. The forecast excludes costs related to the breakup. Tyco said on Nov. 16 that fiscal 2006 profit would rise about 10 percent from the previous year, or to about $2 a share.

?There clearly are some challenges being faced by most of the businesses,? said Richard Radbourne, an analyst with London- based Atlantic Equities, who rates Tyco ?neutral.? ?These are big businesses, put together over many years and quite clearly there are these operating challenges that need to be addressed.?

The lower forecast ?casts uncertainty about waiting through the year for the plan to be executed,? Citigroup analyst Jeffrey Sprague wrote in a note to investors today. He downgraded the stock to ?hold? from ?buy.?

Thomas Lynch will be CEO of the electronics company and Richard Meelia will head the health-care operation. Breen will stay on to run the remaining businesses, which include the world?s biggest fire, security and industrial valve providers.

Tyco expects about $1 billion in costs for tax liabilities and the refinancing of debt.

?We believe separation is a logical next step,? Breen said on a conference call with analysts and investors. Sales increases from existing businesses, rose 3 percent last year, short of the goal of 4 percent to 6 percent, he said.

?It will be easier for them to grow with three separate divisions,? said Michael Bee, an analyst with Cleveland-based Boyd Watterson Asset Management, which owned 271,600 Tyco shares as of September. ?This is really a world-class company with great products and great global reach.?

Tyco?s bonds gained on the announcement. The extra yield, or spread, investors demand to hold the company?s 6.375 percent notes maturing in 2011 narrowed 17 basis points to 99 basis points. A basis point is 0.01 percentage point.

The debt rose more than 1 cent on the dollar to 105.4 cents, according to Trace, the bond price reporting system of the NASD. The securities were the fifth-most actively traded of transactions of $1 million or more. The yield fell to about 5.3 percent. Tyco Healthcare is the world?s second-biggest maker of disposable medical supplies behind Johnson & Johnson, with about $9.5 billion in sales for the fiscal year ended in September. Its brands include US Surgical and Kendall. It also owns a generic drug maker, the world?s biggest maker of acetaminophen.

The electronics unit, the largest maker of connectors used by automobile makers, accounted for about $12 billion of Tyco?s $39.7 billion in revenue last year.

The health-care and electronics companies will be based in Bermuda to take advantage of the country?s lower tax rates.

Tyco joins Viacom Inc., Cendant Corp. and Primedia Inc. as companies that in the past year abandoned a strategy of aggregating disparate businesses.

?Management can focus on one business,? said Donald Yacktman, chief investment officer at Austin, Texas-based Yacktman Asset Management, which owns more than 919,000 Tyco shares. ?From a psychological standpoint as well as from a practical standpoint it?s a positive move.?

Kozlowski, 59, attempted to break up the company in 2002 under a proposal drafted by Goldman, Sachs & Co., a plan later withdrawn amid scepticism among investors about Tyco?s accounting and management. Some analysts are critical of the latest plan.

?We?re looking at a target price on this of $30 and that?s right in the neighbourhood of where it?s at now,? said Stephen Hoedt, an analyst in Cleveland at National City Corp. ?It?s possible that you could get a little more upside from it, but if you look at the businesses on a cash-flow valuation basis, a breakup wouldn?t create that much more value than what we?ve seen.?

Founded by Arthur Rosenberg as in the early 1960s to conduct research for the government, Tyco now has about 250,000 employees. Breen, 49, joined from mobile-phone maker Motorola Inc., where he was president and chief operating officer. During his tenure he replaced most of Tyco?s top management, including the entire board.

Tyco?s net debt was reduced by more than half to $9.3 billion since Breen took over. The bonds are rated BBB+ by Standard & Poor?s and Baa3 by Moody?s Investors Service.

The debt is expected to be allocated among the three companies or refinanced. Any existing or potential liabilities that cannot be associated with a particular entity will be allocated to each of the businesses, and a sharing arrangement among the three companies will be established.

The three companies anticipate paying dividends that will equal the current Tyco payment.