UPDATE 3-BlackBerry 3rd-qtr revenue falls more than expected, shares drop

Fri Dec 19, 2014 10:34am EST
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(Adds CEO comment from conference call, market reaction)

By Allison Martell and Alastair Sharp

TORONTO Dec 19 (Reuters) - BlackBerry Ltd on Friday reported a bigger-than-expected drop in third-quarter revenue, sending shares of the struggling smartphone maker lower, even as it eked out a small adjusted profit and began generating cash flow again.

Revenue fell to $793 million from $1.19 billion a year earlier, falling short of analysts' expectations of $931.5 million.

"It's a number that obviously, to us, is not satisfying," Chief Executive Officer John Chen said on a conference call, noting that the focus has been on margins and cash flow. "We achieved that, but now we're going to turn our attention to revenue."

Shares fell 5.4 percent to $9.52 in morning trade.

Chen said hardware sales in the quarter were weaker than expected as production was limited and the company could only fulfill all device orders early in the fourth quarter.

At an analyst conference in San Francisco last month, Chen had said revenue could slide faster than expected as its sales profile changes.

BlackBerry had long made money charging system access fees, but now offers some basic services for free. As older devices are retired, that erodes revenue, but the company is aiming to boost hardware sales with its new Passport and Classic phones, buying time to scale up new premium services, which are not free, in 2015.   Continued...