CAMBRIDGE, Mass. (AP) _ Polaroid Corp. on Tuesday said profits dropped 49 percent in the last three months of 1992, blaming its lackluster performance on plunging sales in Europe.

The company earned $29.6 million, or 63 cents per share, in the quarter ended Dec. 31, compared with earnings of $58.5 million, or $1.16 per share, in the same period the prior year.

For all of 1992, Polaroid reported profits of $99 million, or $2.06 per share, compared with profits of $675.2 million, or $12.54 per share, the year before when the company won a settlement from Eastman Kodak Co. in a patent dispute.

Sales during the last quarter were $649.2 million, up from $633.4 million in the final quarter a year earlier. For the year, sales rose to $2.15 billion from $2.07 billion in 1991.

Polaroid Chairman I. MacAllister Booth said he was disappointed by the sharp decline in film sales in Europe.

''Although the recession in Europe was evident, the depth of the decline was unexpected,'' Booth said in a statement. But sales were steady in other overseas markets and rose by 7 percent in the United States, he added.

Polaroid said it would boost 1993 profits with the introduction of a new camera system, called ''Joshua,'' which takes clearer instant pictures and is expected to reverse loss of market share to conventional cameras.

Polaroid launched the new product in Europe last fall and expects to roll out the camera in the United States and Japan this year.