Research In Motion Ltd., the struggling maker of the BlackBerry smartphone, fell the most since May after Morgan Stanley downgraded the stock, citing “rapidly deteriorating fundamentals.”

“The only way RIM (Nasdaq: RIMM) remains a viable entity is at a fraction of its current size, a transformation that erases much of its earnings power,” Ehud Gelblum, an analyst at Morgan Stanley in New York, wrote in a note to investors Monday. He cut RIM’s recommendation to underweight, a negative rating, from equalweight, the equivalent of a hold.

[RIM maintains a research and development operation in the Triangle.]

RIM’s stock fell 7.6 percent to $9.11 at the close in New York, the worst decline since May 30. The shares are trading at their lowest level since December 2003.

The company plans to release a new lineup of phones based on the BlackBerry 10 operating system, an attempt to reverse a sales slide and regain market share from Apple Inc.’s iPhone and devices running Google Inc.’s Android. RIM, which has hired JPMorgan Chase & Co. and RBC Capital Markets to help evaluate options, has lost two-thirds of its value in the past 12 months.

The introduction of BlackBerry 10 is “likely too late and fraught with risks,” Gelblum said. A shortage of chips may hamper the release, and the lack of a physical keyboard on new phones may alienate customers, he said.

RIM unveiled a BlackBerry 10 prototype phone without the company’s hallmark keyboard last month. Still, RIM has said it will continue to produce some phones with keyboards.

Profit Projection

Gelblum lowered his projection for fiscal 2014 earnings per share to a loss of $1.39 from a loss of 85 cents, and cut his revenue forecast for the same period to $7 billion from $9.7 billion. The average of analysts’ estimates compiled by Bloomberg was profit of 52 cents on revenue of $12.2 billion.

To reach the break-even point again, without boosting revenue, RIM would have to eliminate 90 percent of its employees, Gelblum said.

Results in the quarter ending in August may “significantly” trail analysts’ estimates because of RIM’s aging portfolio of devices and a pause of shipments ahead of the introduction of the BlackBerry 10 operating system this year, Gelblum said.

Other analysts are similarly pessimistic about RIM’s fortunes. RIM’s new phones will struggle to compete with the latest models from Apple and Samsung Electronics Co., Alkesh Shah, an analyst at Evercore Partners Inc. in New York, wrote in a note Monday. Shah rates RIM the equivalent of a hold.

“We expect fundamentals to worsen at RIM for at least the next two to three years before reaching bottom.”