BlackBerry Ltd. reported a narrowed loss Friday but also posted a 68 per cent sales decline to drive quarterly revenue below $1 billion (U.S.) for the first time since 2007 as smartphone sales tumbled.

Investors initially applauded the lower than forecast loss on disciplined cost management under CEO John Chen, sending the shares ahead in early trading.

But the stock reversed course on worries that cost cutting can only take the company so far, particularly since spending on research and development fell sharply in the quarter. Shares closed the day down 66 cents at $9.31 in Toronto trading.

“The guy is on the move fast,” BGC Partners analyst Colin Gillis said in a note. “He can control expenses but you can’t magically make revenue happen.”

BlackBerry reported a decline in cash burn and an adjusted loss of $42 million or eight cents per share for its fiscal 2014 fourth quarter, below the 56 cent loss expected by analysts, according to Bloomberg data.

“I am very pleased with our progress and execution against the strategy we laid out three months ago,” Chen said.

“We have significantly streamlined operations, allowing us to reach our expense-reduction target one quarter ahead of schedule. BlackBerry is on sounder financial footing today with a path to returning to growth and profitability.”

Anil Doradla of William Blair said investors are less anxious about BlackBerry’s ability to maintain financial stability, calling Chen “the right man at the right time.”

But he said while cost control is encouraging, stemming revenue and customer declines is a longer-term project with uncertain prospects.

BlackBerry is aiming to boost device management and other software services to at least partially offset a sustained drop in hardware sales and related revenue.

It plans to introduce three new high-end physical keyboard smartphones in the next 18 months and will re-launch the legacy Bold phones that remain in high demand.

As well, BlackBerry recently launched the Z3, a lower-cost keyboard phone aimed at emerging markets. “I hope nobody thinks we don’t take seriously the handset business,” Chen said.

The company’s smartphone customer base has shrunk to about 55 million from a peak of 80 million amid intense competition in established and emerging markets.

BlackBerry reported an improved device selling price in the quarter and is focused on lowering costs to at least break even on handset production through a manufacturing outsourcing deal with Taiwan’s Foxconn Group.

Chen asked investors to “bear with me a little bit,” as BlackBerry moves to double its software unit in the longer term and expand its mobile device management offering to encompass more Android and iOS handsets.

He laid out a longer-term strategy in an earnings call that envisions more revenue from commercialization of the company’s messaging app and from its auto infotainment technology.

The CEO also said the company has no plans to move its head office from Canada and said BlackBerry’s QNX connected car technology presents a bigger revenue opportunity than its BBM instant messaging platform.

Chen said the company’s Classic keyboard phone will be available this year along with its BBM for enterprise app and its BES 12 device management upgrade.

He said BlackBerry will take a serious look at bringing its BBM platform to the PC after its user base rose to 85 million after the apps was made available on rival operating systems.

Chen said also revenue declines and operating losses will continue at roughly current levels for the next couple of quarters.

“The problem for BlackBerry is that it doesn’t have a lot of time,” Doradla said.

In the earnings report for the quarter ended March 1, BlackBerry revealed a loss of $423 million or 80 cents per share, compared with a profit of $98 million or 19 cents per share a year ago. Write downs and other non-cash charges pushed BlackBerry’s third quarter loss to $4.4 billion or about $8.37 per share.

Revenue fell to $976 million compared with $2.68 billion a year ago and $2.7 billion in the same quarter of fiscal 2013. Services accounted for 56 per cent or sales versus 37 per cent for hardware and seven per cent for software and other revenue.

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Excluding several one-time items, BlackBerry reported an adjusted loss from continuing operations of eight cents versus the consensus forecast of analyst for a 58 cent per share loss.

In its outlook, BlackBerry says it is targeting break-even cash flow results by the end of its 2015 financial year.

The total of cash, cash equivalents, short-term and long-term investments was approximately $2.7 billion as of March 1, compared to $3.2 billion at the end of the previous quarter.

During the fourth quarter, about 3.4 million BlackBerry smartphones were sold, with about 2.3 million of those being legacy BlackBerry 7 devices. That compares to 4.3 million in the third quarter and 5.9 million in the previous three months.

The loss includes a non-cash charge associated with the change in the fair value of the debentures of about $382 million, a pre-tax recovery of previously recorded inventory charges of about $149 million and pre-tax restructuring charges of about $148 million.

It compares with a loss from continuing operations of $4.4 billion, or $8.37 per share diluted in the prior quarter, and income from continuing operations of $94 million, or 18 cents per share diluted, in the same period last year.

BlackBerry has been cutting costs and restructuring its business in a bid to stay alive including a plan to eliminate of about 40 per cent of the company’s workforce.

Last week, the company announced it had signed a deal to sell more than three million square feet of space and vacant lands — and lease back a portion.

The deal followed the sale in December of a handful of buildings to the University of Waterloo for $41 million under an agreement that would also allow the company to lease back some of them.

And earlier this month, BlackBerry sold its U.S. headquarters in Irving, Texas, to Brookfield Property Group for an undisclosed amount. The company plans to lease back at least part of the six-building location.

For its full financial year, BlackBerry reported a loss of $5.87 billion or $11.18 per diluted share on $6.81 billion in revenue. That compared with a loss of $646 million or $1.23 per diluted share on $11.07 billion in revenue the prior year.

On The Star.com

BlackBerry sets sights on car market

With a file from The Canadian Press

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