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Nokia drags down RIM Add to ...

It didn't take long for investors to connect Nokia Corp.'s profit warning on Tuesday morning to Research In Motion Ltd.'s own competitive struggles. Nokia said that its smart phone sales would be "substantially" less in the second quarter than its earlier forecasts due largely to intense competition.

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That's right, it is struggling to hold onto market share as consumers flock to iPhones and Android-based devices - but apparently, not BlackBerries. Nokia shares slumped 15.9 per cent in New York in late morning trading. RIM shares moved in the same direction, falling more than 4 per cent.

Jon Ogg at 24/7 Wall Street noted that "Nokia's warning this morning is probably just the prelude to another RIM warning that investors have learned to get used to."

RIM shares fell sharply in April after it warned that its earnings weren't going to meet expectations. Many analysts who had stood by the company pulled in their bullish horns after the warning, slashing their target prices and, in some cases, their recommendations.

Mr. Ogg has a solution for both companies, though: Merge.

"By and large, we do not like mergers but this may be the only shot for these companies to stop the bleeding," he said. "Admittedly, this is a long-shot deal. A RIM-Nokia merger might encounter too many problems before getting off the ground. Still, what choices to these two companies have today?"

Follow on Twitter: @dberman_ROB

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