Procter & Gamble Co. (PG) posted a slightly better-than-expected rise in quarterly profit Friday, but its shares fell after the company forecast fiscal year earnings below Wall Street expectations.

After spending the better part of the last two years integrating its acquisition of Gillette, the maker of Tide detergent and Pampers diapers is now girding itself to compete with smaller rivals such as Colgate-Palmolive Co. (CL) and Kimberly-Clark Corp. (KMB).

That strategy includes accelerating its share buybacks, boosting sales in emerging markets, focusing on newer products such as Crest Pro-Health and shedding some of its businesses.

The market, however, focused on the company's disappointing profit forecast.

"Sentiment on the stock has been poor for some time, and we believe the stock needed a stronger outlook to rally on the earnings report," said Goldman Sachs analyst Amy Low Chasen.

Back in May, P&G said it was comfortable with a fiscal 2008 earnings estimate of $3.47 per share, which was analysts' consensus view at the time. Analysts then raised their average forecast to $3.48.

On Friday, P&G said it expects to earn $3.44 to $3.47 per share in fiscal 2008, which began in July.

Its fourth quarter profit was $2.27 billion, or 67 cents per share, in the fiscal fourth quarter ended June 30, up from $1.9 billion, or 55 cents, a year earlier.

P&G had forecast earnings of 64 to 66 cents per share. Analysts average forecast was 66 cents a share, according to Reuters Estimates.

Sales rose 8 percent to $19.3 billion, topping analysts' average forecast of $19.12 billion and P&G's forecast of a 6 to 7 percent rise. Products such as Gillette Fusion razors, Tide Simple Pleasures detergent and Crest Pro-Health toothpaste and rinse drove the growth.

SPENDING PLANS

P&G plans to repurchase $24 billion to $30 billion of its stock over the next three years, at a rate of $8 billion to $10 billion per year. In fiscal 2007, it spent $5.6 billion on share buybacks.

The company expects a tough competitive environment in the current fiscal year as Colgate and Kimberly-Clark spend their restructuring savings to promote their brands.

P&G, for its part, is budgeting as much as $400 million for restructuring in 2008, twice its original budget.

During a conference call, Chief Financial Officer Clayt Daley said P&G is more likely to sell businesses rather than buy businesses right now. Those businesses are likely to go to strategic buyers rather than private equity, he added. He did not specify which businesses were on the block.

"It now has an opportunity to look at all of its product lines and see where real growth is," said Eric Schoenstein, co-portfolio manager of the Jensen Portfolio.

"That leadership team constantly challenges brands and if those brands don't measure up they'll look to sell them," he said. Jensen owns over 1.7 million P&G shares.

Chairman and Chief Executive A.G. Lafley said the company's North American business did well in July, despite consumer sentiment concerns such as high gasoline prices.

CFO Daley said this year's earnings would be more volatile quarter-to-quarter as the company works on restructuring and other projects, such as bringing out concentrated versions of its laundry detergents.

He also said raw materials and energy costs should be up again this year and that P&G may look at raising prices.

P&G shares fell 35 cents to $62.95 in midday trading on the New York Stock Exchange after falling as much as 1.5 percent earlier in the session.

Shares of Cincinnati-based P&G were down 3.1 percent during the April-June quarter, while the Dow Jones industrial average , of which it is a component, rose 8.5 percent.