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RIM Plunges After Cutting Profit Forecast on BlackBerry Demand

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RIM Chiefs Defend PlayBook Against Critics
An employee demonstrates the Research In Motion BlackBerry PlayBook tablet computer in New York. Photographer: Ramin Talaie/Bloomberg

April 28 (Bloomberg) -- Research In Motion Ltd., facing intensifying competition from Apple Inc. and Google Inc., plunged in late trading after cutting profit forecasts on slower-than-expected demand for BlackBerry smartphones.

Profit this quarter will be $1.30 to $1.37 a share, Waterloo, Ontario-based RIM said today in a statement. The company last month forecast profit of $1.47 to $1.55 a share. Sales in the quarter ending May 28 will be “slightly below” the $5.2 billion to $5.6 billion the company had forecast.

RIM said BlackBerry shipments will be at the lower end of the range of 13.5 million to 14.5 million it projected last month, and the mix of devices will shift toward cheaper models.

“The sales on their existing devices must have fallen off a cliff,” said Matt Thornton, an Avian Securities LLC analyst in Boston who has a “neutral” rating on the stock. “They are getting hit by a combination of a stale portfolio and heated competition on devices.”

RIM fell $6.17, or 11 percent, to $50.43 in late trading, after closing at $56.59 on the Nasdaq Stock Market. It has lost 2.7 percent this year as of today’s close.

Analysts predicted earnings of $1.50 a share on sales of $5.44 billion for this quarter, the average estimates compiled by Bloomberg.

The company said full-year earnings will be about $7.50 a share, after projecting earnings in excess of $7.50 last month. The company said it anticipates “strong” revenue growth in the third and fourth quarters, helped by new BlackBerry models and “prudent” cost management. Analysts estimate earnings of $6.91 a share on average.

‘Takes Longer’

“All things being equal we would love to have these products earlier and not be having this call,” said Jim Balsillie, co-chief executive officer in a conference call with investors. “Because it’s such a big upgrade, it takes longer.”

The forecast shows that higher-end BlackBerrys like the Torch, designed to compete with Apple’s iPhone and devices built on Google’s Android platform, are missing estimates, said Michael Walkley, an analyst at Canaccord Genuity Ltd.

“Higher-end phones have not sold so well,” said Walkley, who has a “hold” rating on the stock. “The investment community was already skeptical about the full-year guidance of $7.50 and this gives them reason to be more skeptical.”

RIM said shipments of the PlayBook tablet, which started selling in the U.S. April 19 to challenge Apple’s iPad, are in line with its previous estimates. The device hasn’t experienced significant supply disruptions due to the Japan earthquake, RIM said.

Sliding Share

RIM’s share of worldwide smartphone sales slipped to 14 percent in the fourth quarter from 20 percent a year earlier, according to Canalys, a British research company. Apple’s share was unchanged at 16 percent, while Android’s more than tripled to 33 percent.

“Management needs to deliver on the product side,” said Paul Taylor, who manages about $14.5 billion as chief investment officer of BMO Harris Private Banking in Toronto, including RIM and Apple shares. “That includes competitive next-generation smartphones and building out the app library.”

(RIM held a conference call at 5:30 p.m. New York time. Go to http://www.rim.com/investors/events/index.shtml to access the call).

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net; Greg Bensinger in New York at gbensinger1@bloomberg.net

To contact the editor responsible for this story: Peter Elstrom at pelstrom@bloomberg.net

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