Research In Motion stock tumbled more than 4 percent on Wednesday as mounting concerns that Saudi Arabia will block its service clouded any positive sentiment generated by Tuesday's launch of a new BlackBerry.

Governments including those of Saudi Arabia and India have demanded access to RIM's rock-solid encryption system on national security grounds. RIM has said its system does not allow for any third party access to corporate data.

The standoff and threatened service blocks would crimp RIM's pursuit of rapid-pace international growth to offset the growing competition it faces in North America.

RIM shares on Nasdaq fell $2.30 to $53.22, and on the Toronto Stock Exchange they dropped C$2.53 to C$54.25. The stock has shed about 25 percent of its value over the past 12 months, dropping 19 percent since the year began.

RIM was holding 11th-hour talks with Saudi Arabian telecoms operators on Wednesday to avert a Friday deadline to cut BlackBerry Messenger service, a source at one of the telecoms told Reuters.

India has also warned it will halt service if RIM does not address its concerns. RIM has proposed sharing some details of its services, though Indian security agencies have demanded full access, a government source told Reuters.

RIM officials were not immediately available for comment.

The company has said in a statement that claims that it has provided unique wireless services or access to any one government are unfounded.

The clamor over security issues has drowned out a modestly upbeat analyst response to RIM's BlackBerry Torch, launched on Tuesday. The new touchscreen phone, which features a slide-out keyboard, improved Internet browsing and a new operating system, will go on sale August 12 in the United States.

The Torch closes the gap between the BlackBerry and feature-rich devices such as the iPhone and Android, and analysts are waiting to see whether it will be a hit with consumers.

Analysts said the much-hyped device lacked a wow factor, but they expected a big marketing push from carrier partner AT&T.

Launched earlier than expected and in time for the back-to-school season, the new smartphone could lift RIM's upcoming financial results, some analysts say.

Smartphones running Google's Android software were the top seller among consumers in the United States in the second quarter, industry tracker NPD said on Wednesday.

Android represented one-third of all smartphones purchased between April and June, while RIM's BlackBerry slid to second place for the first time since 2007.

BlackBerry's market share fell 9 percentage points to 29 percent, while Apple's iPhone had a 22 percent share.

($1=$1.02 Canadian)

(Reporting by Susan Taylor; editing by Peter Galloway)

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