Research In Motion (RIM), the Canadian maker of BlackBerry smart-phones, paid a short-term price yesterday for what it said were long-term goals as investors balked at its plans to broaden its horizons beyond business users.

Its share price fell more than 25 per cent amid fears that higher costs would hit its gross profit margins.

The company said late on Thursday that the costs of introducing third-generation handsets, such as the high-end BlackBerry Bold, would eat into its profits.

Jim Balsillie, RIM’s co-chief executive, argued that the higher cost of producing more sophisticated models and marketing them would pay off in the long term. “We are in a surgetype situation right now,” he said.

Yet the warning sparked a 20 per cent stock drop after markets closed on Thursday and a string of downgrades from analysts. Yesterday RIM shares took a further battering, closing more than 27 per cent lower at $70.76 on Nasdaq.

RIM has been revamping its product line to expand its customer base, introducing the BlackBerry Pearl flip this month, for example. Most handsets sold in the United States have a clamshell, or flip, design.

RIM is also preparing to introduce a touchscreen phone to compete more directly with Apple’s iPhone. “We’ve never introduced so much new product so fast,” Mr Balsillie said. He added that it was difficult for RIM to pass on additional costs to consumers while keeping prices of new BlackBerry models at attractive levels.

Scott Pope, a First Analysis Securities Corp analyst, said: “It is understandable that margins are going to be pressured when you are introducing several new products with more expensive components.”

The company said that its enterprise business, mainly corporate customers, was still robust, despite the economic uncertainty. However, analysts and investors have also been concerned that some of RIM’s large corporate clients could scale back their BlackBerry purchases and upgrades as the economic downturn deepens.

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