By Ben Dummett 

BlackBerry Ltd. on Friday posted a surprise third-quarter operating profit as cost-cutting continued to pay off, but Chief Executive John Chen's track record as a turnaround expert remains on the line after the smartphone maker's revenue dropped 34% and fell well short of expectations.

Mr. Chen assumed the top job at BlackBerry a little more than a year ago, after reviving the fortunes of Sybase Inc. and selling the California company to SAP SE in 2010 for $5.8 billion. Mr. Chen is aiming for similar success at BlackBerry, first by returning the smartphone maker to profitability by cutting costs and outsourcing device manufacturing, and then by reigniting sales with mobile-security software and services and new devices.

The latest quarterly results suggested the first part of that strategy is working. BlackBerry's quarterly loss narrowed sharply in the latest period, and the company generated its first operating profit in nearly two years. But the weak top-line performance showed that winning new business remains a challenge.

The revenue number "obviously to us is not satisfying," Mr. Chen told analysts on the company's earnings conference call. "Sustainable profitability can only come from revenue growth," he said.

BlackBerry is moving about 200 of its employees into the field to help boost sales, while at the same time relying on AT&T Inc.'s wireless unit, Verizon Wireless, Vodafone Group PLC and other partners to help distribute its new devices and security software.

The real fruits of those efforts aren't expected until next year, Mr. Chen said. "To see that revenue growth we probably need a couple of [more] quarters," he said.

Investors were also disappointed; sending the shares down 4.2% to $9.65 in recent trading in New York.

BlackBerry reported a net loss of $148 million, or 28 cents a share, compared with a hefty loss of $4.4 billion, or $8.37, a year earlier. The year-earlier results included sizable asset-impairment and inventory charges related to its unsuccessful expansion into the consumer-device market.

BlackBerry earned 1 cent a share on an adjusted basis, better than the loss of 5 cents that analysts were predicting, according to a Thomson Reuters poll. But revenue came in at $793 million, well below analyst expectations for revenue of about $932 million.

Earlier this week, BlackBerry launched its newest smartphone. The Classic is meant to lure back customers with traditional BlackBerry features like a physical keyboard and trackpad. The launch came after the third quarter ended Nov. 29, but the company is counting on the Classic and another phone, the Passport, to help fuel revenue growth. Launched in September, the Passport is more of a niche device aimed at professional users such as doctors.

Mr. Chen said orders for the Classic exceeded the initial 200,000 preorders the company received for the Passport, but he didn't specify the number of Classic orders or update order figures for the Passport.

The company said it recognized hardware revenue on about 2 million devices in the latest period. BlackBerry needs to sell 10 million phones a year to make a profit from the device business. In the first nine months, the company recognized revenue on a total of 5.7 million phones, indicating it needs to generate revenue on 4.3 million phones in its fourth quarter for this business to make money.

Some analysts suggested that will be a struggle for this fiscal year and next.

"For me, it's aggressive," as the company is still waiting for AT&T to start selling the Passport device in the U.S. and "we still have to wait for the reception of the Classic," said Ramon Llamas, an analyst at research firm International Data Corp.

BlackBerry also is betting on doubling software revenue to $500 million in the next year fiscal year to fuel growth, driven largely by sales of the latest version of its mobile device management technology that companies use to oversee employee devices on their corporate networks. The product was launched in November, so it isn't expected to generate significant revenue until next year. But in a positive sign for the product, BlackBerry said it would end an incentive program aimed at encouraging enterprises to adopt the offering earlier than planned, due to strong interest.

The offering "has been very well received," generating 100% growth from the last quarter, Mr. Chen said.

Write to Ben Dummett at ben.dummett@wsj.com

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