Analysts said RIM was able to attract new subscribers with flashy smartphones such as the touch-screen Storm or high-end Bold, but its existing customers were not upgrading their devices as frequently with economic conditions weak.

"You probably see big financial institutions cutting costs ... and the consumer is just not getting a new handset," said James Cordwell, an analyst with Atlantic Equities in London. "It just shows they're not immune to the economic slowdown like anybody else."

RIM blamed a variety of factors, including product mix, lower inventory levels and a higher ratio of new subscriber sales to upgrade and replacement sales, for subscriber growth outperforming revenue and earnings in the holiday quarter.

The company said it now expects net subscriber account additions in the quarter that ends Feb. 28, to be 20 percent higher than the 2.9 million additions it forecast on Dec. 18.

But earnings per share and gross margin would come in at the low end of its forecast range, and revenue would be at or near the mid-point, said RIM, which competes with Apple Inc., Nokia and other smartphone makers.

In December, RIM had forecast quarterly revenue between $3.3 billion and $3.5 billion, with earnings per share of 83 cents to 91 cents. Both were above Wall Street's estimates at the time, and analysts ratcheted up their forecasts and the stock surged, gaining more than 40 percent year to date.

Wednesday's outlook signals RIM could miss the mean analyst forecast for earnings per share of 86 cents, according to Reuters Estimates. Analysts were, on average, expecting revenue of $3.4 billion.

Avian Securities analyst Matthew Thornton said RIM was probably selling "a lot more Storms which carry a lower gross margin and probably a lot less of their older legacy products, which carry much higher margins."

He added, "So you have a mix shift which weighs on margins and brings EPS to the low end of the range despite very good subscriber additions."

While subscriber performance after the holiday season had exceeded its expectations, RIM said it anticipates subscriber additions in the current quarter to return to normal levels.

The shares were down 11.8 percent at C$62.57 ($54.06) on the Toronto Stock Exchange shortly after the open. On Nasdaq, the shares were off 11.6 percent at $50.44.

By: DocMemory
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