BlackBerry maker Research In Motion said on Thursday its profit dropped and gave an outlook that fell short of analyst forecasts heading into the holiday shopping season, sending its shares down almost 10 percent.

RIM said its quarterly profit slid 3.5 percent and that it added only 3.8 million new subscribers, at the low end of the forecast it had provided in June.

That suggests that recession and competition from Palm Inc
and Apple , the maker of the popular iPhone, have taken a toll on RIM's growth.

Before the results, investors worried a sluggish economy in the United States and other big markets would cause companies to delay upgrades of the BlackBerry handsets used by their employees.

There was also concern that retail consumers -- a growing segment of RIM's customer base -- could opt for cheaper and less feature-rich mobile phones to save money.

With the economy appearing to be stabilizing and some recessionary fears abating, competition on the higher end of the market may now represent RIM's biggest challenge, said Tavis McCourt, an analyst at Morgan, Keegan & Co.

Apple is still the biggest worry, McCourt said, adding that RIM's dominance of the North American smartphone market could erode as sales and availability of the iPhone grow.

To respond to the iPhone's popularity, Waterloo, Ontario-based RIM launched its touchscreen BlackBerry Storm and plans a next-generation version of the device, expected in the coming months.

RIM's shares have posted impressive gains this year as the economy showed renewed signs of life. The stock has more than doubled since March when it slid to a year-low of $35.05 on the Nasdaq.

Ahead of Thursday's results, expectations were running high as analysts thought the company would top forecasts thanks to strong sales of new BlackBerry models such as the Tour, the high-end Bold and the current version of the Storm.

But after the markets closed on Thursday, the shares tumbled when RIM reported earnings of $475.6 million, or 83 cents a share, for its second quarter ended August 29. That was down from a profit of $495.5 million, or 86 cents, a year earlier.

Excluding a $112.8 million payment to settle patent litigation with Visto Corp, RIM earned $1.03 a share. The result compared with analysts' average forecast of $1 a share, according to Reuters Estimates.

Revenue rose to $3.53 billion from $2.58 billion a year earlier but fell short of analysts' $3.63 billion consensus.

With the new customers, RIM now has a total of about 32 million subscribers and shipped about 8.3 million BlackBerry smartphones in the quarter.

FORECAST DOESN'T LIVE UP

For its current third quarter ending November 28, RIM expects revenue of between $3.6 billion and $3.85 billion, and a profit of between $1 and $1.08 per share.

Before the company issued its outlook, analysts had forecast third-quarter earnings at $1.05 a share on revenue of $3.9 billion.

A lot of people on the Street have been talking up (the third quarter) as one where RIM was going to come and blow everybody away, said Duncan Stewart, an analyst at DSAM Consulting in Toronto.

Even though it's perfectly decent guidance with all kinds of great year-over-year growth and gross margins, it doesn't live up to the advance billing.

The company said that it expects to add between 4 million and 4.3 million new subscribers in the current quarter.

In a conference call with analysts, RIM co-CEO Jim Balsillie reaffirmed plans to launch new BlackBerry models in the coming months.

We're ... coming out with higher-end devices and you're going to see more of those launched in the quarter, he said, suggesting the company will continue to target the corporate market with new handsets.

RIM's shares fell to $75.10 in after-hours trading, down from their regular-session close of $83.06 on the Nasdaq market.

Peter Misek, an analyst at Canaccord Adams, said the results and forecasts will have a negative impact but said the outlook is likely a conservative one.

We would be buyers here, he said in reference to the share price.

(Additional reporting by Scott Anderson and Cameron French; editing by Frank McGurty)