RIM's Forecast Falls Short (Update)

Shares of BlackBerry maker Research in Motion (RIMM Quote) plunged after the company missed Wall Street's second-quarter expectations and guided below profit estimates for the third quarter due to the rising costs of new product launches.

The Waterloo, Ontario-based BlackBerry maker said second-quarter profit rose to $495.5 million, or 86 cents a share, compared with a net income of $287.7 million, or 50 cents a share, a year earlier. Revenue rose 88% to $2.58 billion from $1.37 billion a year ago.

Analysts polled by Thomson Reuters were expecting revenue of $2.59 billion and earnings of 87 cents a share. RIM had offered guidance in its first-quarter report of earnings a range of 84 cents a share to 89 cents a share on revenue of $2.55 billion to $2.65 billion.

Shares of RIM finished 82 cents, or 0.9% higher during Thursday's session at $97.53, but were falling 20% in recent extended trading to $78. That marks a new 52-week low for shares of RIM.

Looking ahead to the critical third quarter, when wireless carriers begin running holiday promotions, RIM guided revenue in the range of $2.95 billion to $3.10 billion. The company forecast earnings in the range of 89 cents to 97 cents a share. Wall Street is expecting the company will notch a profit of 98 cents a share on revenue of $2.94 billion.

RIM said its profit expectations were based on a gross margin estimate of about 47%, below the 50.7% mark shown in the second quarter. During the company's conference call, RIM said the decline in gross margin is due to higher costs for new product launches. Looking beyond the third quarter, RIM said it expects long-term gross margin in the mid-40% range.