Research In Motion is the latest smartphone maker to fall victim to the sagging economy.
The maker of the popular BlackBerry mobile devices late on Tuesday reduced its outlook for its fiscal third quarter, which ended on Saturday. The company said it expects to earn between 81 cents and 83 cents a share on revenue of between $2.75 billion and $2.78 billion. In September, RIM said it expected profits between 89 cents and 97 cents on revenue of between $2.95 billion and $3.1 billion.
RIM's executives blame the shortfall on the stronger dollar and the "general economic weakness in the United States." Other phone manufacturers have also reported lower-than-expected sales. Nokia, the largest cell phone maker in the world, warned last month that it expects to sell fewer handsets than it had expected during the fourth quarter of 2008.
Palm, which makes the Treo, also reported that it expects dismal earnings. The company said revenue for its second fiscal quarter will be just $190 million to $195 million. Meanwhile, Wall Street analysts had expected Palm to bring in about $331 million in revenue.
In addition to slowing demand due to economic troubles, RIM also faces stiff competition, especially from Apple. Market research firms have crowned Apple's iPhone the most popular phone in the U.S. market and the second most popular smartphone worldwide.
RIM recently introduced its iPhone competitor, the BlackBerry Storm. The device, which, like the iPhone, has a touch screen instead of a physical keyboard, launched two weeks ago exclusively on Verizon Wireless's network in the United States.
RIM says response to the new product has been very strong. The company said it signed up a record number of new customers the day the BlackBerry Storm hit store shelves in the United States. Indeed, customers lined up outside Verizon Wireless stores in several cities to be among the first to get the device.
Of course, the hype and frenzy surrounding the Storm paled in comparison to that surrounding the launch of the original iPhone and then the iPhone 3G this past summer.
Still, RIM believes that the strong momentum for the BlackBerry Storm will continue into the fourth quarter. Other new BlackBerry models, such as the Bold and the clamshell Pearl, should also help spur growth, executives have said.
"Initial sales of new products have been very positive, and we believe we have the strongest smartphone portfolio in the industry by far; however, product launch timing, general economic conditions, and foreign-exchange volatility have tempered our results in the third quarter," Jim Balsillie, Co-CEO at RIM, said in a statement. "We believe RIM is well-positioned to capitalize on the increasing smartphone market opportunity, and we remain focused on driving growth in the fourth quarter of fiscal 2009 and beyond."