Updated from 4:13 p.m. ET

Shares of medical-equipment makers Varian Medical Systems (VAR - Get Report) and Hologic ( HOLX) fell Thursday after their competitor, Intuitive Surgical (ISRG - Get Report) announced weaker-than-expected fourth-quarter sales as hospitals cut spending on new equipment.

Late Wednesday, Sunnyvale, Calif.-based Intuitive said fourth-quarter sales rose 22%, but the figure still fell short of Wall Street expectations. The company cited a weak economy as the culprit in lower-than-expected surgical device sales.

Intuitive closed down $7.34 or 6.2% to $110.54 after the shares fell to a low of $99.75 during the session, their lowest point in nearly two years.

"This reaffirms our view that hospital capital equipment spending materially deteriorated in the fourth and that 2009 capital expenditure budgets will continue to face pressure," said Citi analyst Amit Bhalla, in a note to investors.

Palo Alto, Calif.-based Varian and Bedford, Mass.-based Hologic both make different products, but also count hospitals as key customers. With the economy lagging, hospitals and other health care providers have been cutting costs and spending, which includes buying less new equipment.

Shares of Hologic, which makes diagnostic and imaging systems geared toward women's health, fell 71 cents, or 5.9%, to $11.43 for the day. The stock has traded between $10.54 and $35.79 over the last 52 weeks.

Meanwhile, shares of Varian, which makes radiation therapy systems, fell $1.62, or 4.7%, to $32.42 in midday trading. The stock reached a low of $30.04 earlier in the session, its lowest point in more than five years.

Bhalla said the lagging economy is likely to hurt sales of Hologic's digital mammography systems, but reaffirmed a "Buy" rating. He reaffirmed a "Hold" rating on Varian, citing likely weakness in new orders.

Meanwhile, Lazard Capital Markets analyst Dr. Sean Lavin reaffirmed a "Buy" rating on Varian but lowered his price target to $39 from $50.

"We believe radiation therapy may be more resilient than robotic surgery, as it is a necessity for cancer treatment while surgery can be completed by hand," he said in a note to investors, adding that Varian had a strong competitive advantage.

Elsewhere in the sector, Emergent ( LZR) 24% to $9.50 and ArthroCare ( ARTC) popped 16.9% to $8.42.

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