Research In Motion is losing market share much faster than expected not just in the United States but globally, amid mounting concerns over its cash flow and ability to meet outlook, analysts warned on Friday.
The Nasdaq-listed shares of the BlackBerry maker tumbled about 21 percent in pre-market trading.
On Thursday, the company posted a sharp drop in quarterly profit, painted a dismal picture for the current quarter and said it now expects to reach only the lower end of an already reduced full-year outlook.
"While the RIMM bulls have long pinned their hopes on international growth offsetting North America declines, this quarter largely defeated that thesis, as international revenues are now also in steep decline," Goldman Sachs analyst Simona Jankowski wrote in a note to clients.
Second-quarter revenue from international operations, excluding UK, fell 15 percent from the previous quarter -- proof that the decline in RIM's market share is not constrained to the U.S. and UK markets.
RIM's BlackBerry -- once a byword for corporate communication -- has lost ground to Apple Inc's iPhone and devices running Google Inc's Android software.
Goldman estimates RIM's global market share declined to 9 percent in the second quarter from 16 percent a year ago.
"The North American market share losses persist and we believe this trend is starting to spread to international markets... with slow signs already in UK," Sanford C. Bernstein analyst Pierre Ferragu wrote in a separate note to clients.
Yet, RIM's management remains in "blatant denial," said Bernstein's Ferragu, who believes the company's outlook for the third quarter and the full year appears "unrealistic."
"The co-CEOs do not recognise the failure of the Playbook and continue to sell its merits in terms of security," he said, noting that PlayBook tablet computers shipments fell from 500,000 to 200,000 units in one quarter.
PLAYBOOK A "DISASTER"
RIM's Co-Chief Executive Mike Lazaridis, in a conference call after the results, said he was confident that RIM was on track to return to growth in the third quarter, while co-CEO Jim Balsillie promised a software upgrade he dubbed PlayBook 2.0.
But National Bank Financial analyst Kris Thompson called the PlayBook "nothing short of a disaster" and said RIM now needs to spend money to promote the PlayBook in order to move inventory.
Thompson was also concerned about the smartphone maker's cash flow after the company announced plans to raise its existing credit facility to $500 million from $100 million. RIM is set to burn $300 million this fiscal year, he estimated.
National Bank's Thompson downgraded RIM to "underperform" from "sector perform," while Raymond James analyst Steven Li cut his rating on the stock to "market perform" from "outperform."
In a separate note, Citigroup analysts Jim Suva and Kevin Dennean, who rate the stock "sell," said RIM's margins were under pressure as carriers shift their promotion spending to Android and Apple.
"Promotion commotion hurts gross margins and we don't see it getting better," they said.
Analysts at Barclays Capital, Susquehanna, CIBC World Markets, Raymond James, Wedbush Securities and Canaccord Genuity cut their price targets on the stock.
(Reporting by Tenzin Pema in Bangalore; Editing by Maju Samuel and Joyjeet Das)