RIM cuts outlook, held back by slower U.S. economy

Wed Dec 3, 2008 12:48pm EST
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By Wojtek Dabrowski

TORONTO (Reuters) - The weak U.S. economy has finally caught up with Research In Motion, forcing the maker of the BlackBerry smartphone to cut its quarterly profit estimate as sales slow, margins narrow and a stronger U.S. dollar compresses revenue.

RIM's already battered shares fell 5 percent at the opening of the Nasdaq after the company warned late Tuesday that it made less money and sold about 10 percent fewer BlackBerries than it had expected during the quarter that ended November 29, based on preliminary figures.

The volatile stock -- which set a high of $148.13 in June -- later bounced back to trade 3.3 percent higher at $38.54 as at least one analyst said the market had expected a lowered outlook.

"Basically, Research In Motion is experiencing the effects of the slowing economy like other vendors of handsets and general consumer electronics devices," said First Analysis Securities Corp analyst Scott Pope.

The lowered outlook came less than a month after RIM co-Chief Executive Jim Balsillie said the current market environment is fraught with challenges and referred to it as "a more intense time than I've ever known."

Investors and analysts have long worried that the slowdown in the economy could prompt corporate customers to delay upgrading their BlackBerry models from earlier versions in a bid to clamp down on costs.

Waterloo, Ontario-based RIM has pushed aggressively into the broad consumer market to diversify its customer base beyond the executives, politicians and professionals who have been its mainstay.

But that strategy carries the risk that consumers, facing a severe global slowdown, will tighten their belts, opting instead for cheaper and less feature-rich smartphones than RIM's BlackBerry.   Continued...

<p>A new Blackberry Bold handset is seen during its launch in Mumbai September 18, 2008. REUTERS/Punit Paranjpe</p>