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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.
"Since Research In Motion has entered the consumer space ... they are going to experience a revenue hit from slowing consumer spending," Pope said.
RIM has long argued that its users are unlikely to give up their mobile phones to save money even as the economy falters.
The company also faces mounting competition from Apple's iPhone and from Nokia's latest lineup of smartphones.
RIM said it now expects quarterly revenue of between $2.75 billion and $2.78 billion -- 9 percent below the midpoint of analysts' forecasts, which ranged from $2.77 to $3.10 billion.
Diluted adjusted earnings are expected to come in at 81 cents to 83 cents a share. The company initially forecast diluted earnings of 89 cents to 97 cents a share for the quarter. Gross margin is expected to be between 45 and 46 percent and final results will also be hurt by a negative tax-rate impact, RIM said.
Analysts, on average, had expected third-quarter earnings of 89 cents a share on revenue of $2.92 billion, according to Reuters Estimates.
"Product launch timing, general economic conditions and foreign exchange volatility have tempered our results in the third quarter," Balsillie said in a statement.
It was a sharp contrast to the bullish tone he had taken just two months ago when the company reported strong second-quarter results in late September.
"There's a sense out there that RIM has too many products on the go simultaneously," said Duncan Stewart, technology analyst at DSAM Consulting in Toronto, adding the lower outlook announced on Tuesday night was "pretty much built into the market expectations."
The company has launched a flip-phone version of the BlackBerry, as well as a touch-screen model called the Storm, to target retail users. At the same time, it has rolled out the BlackBerry Bold, a high-end handset aimed at its base of business clients.
The company now expects net new BlackBerry subscriber accounts in the quarter to total about 2.6 million, 10 percent below its previous forecast for 2.9 million.
The slowing subscriber growth coincides with the release this week by Nokia of a new set of models that aim to compete with the BlackBerry.
Nokia, the world's top cellphone maker, is expected to lower its mid-term profit forecasts at a global investor day in New York on Thursday.
RIM's move also follows a dire warning on Monday from long-struggling smartphone maker Palm Inc, maker of Treo and Centro devices. It said revenue for its latest quarter would fall sharply below Wall Street's already depressed expectations.
RIM's revised earnings forecast excludes the negative effect on the company's tax rate from the depreciation of the Canadian dollar relative to the U.S. dollar. Third-quarter tax rates will range from 40 to 42 percent, a sharp hike from the 29 to 30 percent rate in the second quarter.
Additional reporting by Paul Sandle in London, Tarmo Virki in Barcelona and Sakthi Prasad in Bangalore; Editing by Frank McGurty