09/16/2011 04:15 EDT | Updated 11/15/2011 05:12 EST

Research In Motion Shares Tumble In TSX Opening Trading

MONTREAL - Investors punished Research In Motion on Friday — wiping out $3 billion of its stock value — after the BlackBerry maker reported lower device sales and weaker profits and analysts questioned its consumer appeal.

Shares of the consumer technology company closed down 20 per cent — falling $5.90 to $23.50 with more than 9.8 million shares changing hands on the Toronto Stock Exchange and more than 100 million on the Nasdaq market.

As a result, RIM's market capitalization fell to about $12.3 billion.

The stock selloff came a day after RIM (TSX:RIM) announced its second quarter profit dropped 58 per cent to US$329 million. Its revenue fell 15 per cent to US$4.2 billion in the second quarter, missing analysts' expectations.

RIM said it expects better times ahead, but analysts remain concerned about its aging lineup of BlackBerry smartphones, low sales of its new PlayBook tablet and its ability to launch appealing new smartphones in a hyper-competitive consumer marketplace.

William Blair & Co. analyst Anil Doradla said RIM's share value isn't poised to go up due to its weak financial results and product stumbles and misses.

"Can this be a mid-teen stock?" Doradla asked. "I can easily see it moving toward that."

Wunderlich Securities analyst Matthew Robison said it was expected that updated BlackBerrys such as the Bold were going to come out late and the second quarter was "going to be a mess."

"It looks to me like there's a lot of passion in the market right now," Robison said from San Francisco.

"Clearly, there are issues with the Street's willingness to accept management's guidance."

Doradla called the BlackBerry brand "tainted."

"It's almost like they're not learning from their mistakes," he said from Chicago.

Doradla noted RIM's attempt in 2008 to woo consumers with its first touchscreen phone called the Storm and how it debuted with software problems that were eventually fixed, but left RIM with the reputation that it had a "bad product."

"It's deja vu all over again for the PlayBook," he said of RIM's newly launched tablet which only shipped 200,000 units in the second quarter, less than half of what analysts had been expecting.

RIM announced a major software upgrade for the PlayBook coming in October that will let users install their BlackBerry email, contacts and calendar and can run Android software applications that have been converted to run on the BlckBerry system.

"On such an iconic product _ a new product category in a hyper-competitive environment— you cannot say 'Oops, we got it wrong and we need new software for it.'"

RIM is banking on the success of a new generation of BlackBerrys with the same operating system as its PlayBook tablet, expected to be released early next year that will be more like mobile computers.

Robison said the Waterloo, Ont., company may have to consider a separate BlackBerry product line for consumers that's friendly to Android software apps.

"If they don't do that, in my opinion, then they will become a smaller company and they will continue to participate with their installed base of passionate BlackBerry users," he said, adding RIM would become a "niche" player with a focus on business customers.

"The consumer is a very fickle customer. Unless you can really capture their imaginations like Apple has done, it's tough love."

Robison said RIM has a choice to make about its future.

"They either become a smaller more profitable company or they become part of the Android marketplace phenomenon," he said.

Growth of Google's Android smartphone operating system has exploded with consumers snapping up Samsung, LG and Motorola handsets that use the Android system and Android software applications.

There have been calls for RIM to easily allow the use of Android apps on its devices. RIM has also been slower to move to integrating touchscreens into its devices. Also in its financial results, RIM booked a charge of $118 million to pay the cost of cutting 2,000 jobs, about 11 per cent of its workforce.