CTI Molecular Imaging ( CTMI) warned Friday of a steep third-quarter earnings shortfall, as sales of medical scanners slowed sharply.

CTI said it expects to post a third-quarter profit of 3 cents a share on sales of around $88 million. Wall Street analysts had forecast a 10-cent profit on sales of $98 million. The company's shares slumped 20%.

CTI also warned of a fourth-quarter shortfall, projecting earnings of around 18 cents a share on sales of at least $129 million. Analysts surveyed by Thomson First Call had forecast fourth-quarter earnings of 24 cents a share on sales of $140 million.

The Knoxville, Tenn.-based company offers products and services for positron emission tomography, a diagnostic imaging technology used in the detection and treatment of cancer, neurological disorders and cardiac disease.

"It has become apparent that the rate of unit growth in the domestic PET and PET/CT market has slowed considerably from the prior year," CEO Ron Nutt said. "We believe that this slowdown is a result of the dramatic market shift to higher-priced PET/CT scanners. Since PET/CT's are significantly more expensive than dedicated PET systems, this product mix shift has caused a lengthening in the sales cycle and effectively priced out certain customers who do not yet have the physician referral base to financially support a PET/CT.

"We believe that the market is currently in a consolidation phase as the adoption rate of PET is catching up with all the new capacity added during 2002 and 2003," Nutt added. "We see this consolidation continuing for the next few quarters, resulting in a flat market for PET and PET/CT scanners in 2005."

On Friday, CTI shares dropped $2.74 to $10.63.