WATERLOO, Ont. -- BlackBerry Ltd. (TSX:BB) made progress towards improving its bottom line in the third quarter, but the Canadian technology company still faces an uphill battle in swaying sentiment on the smartphones that built its reputation.

Sales of BlackBerrys slipped 10 per cent in the three months ended Nov. 29, a period which saw the company introduce the large-screen Passport model as a way to slow the rapid decline of its customer base.

The defection to other smartphones weighed heavy on the company's revenue performance for the quarter, which fell short of analyst expectations, and had chief executive John Chen urging investors to remember he said rebuilding the company would take time.

"To see this revenue growth, we probably need a couple quarters," he told analysts on a conference call Friday morning.

"It is my belief that we can grow and stabilize the revenue" in the next financial year, which starts in March, he said.

Chen was brought into the Waterloo, Ont.-based company just over a year ago in hopes that he could turn around the money-losing smartphone maker. Over the past year he has made some major progress towards that goal.

BlackBerry narrowed its net loss to US$148 million in the third quarter, equivalent to 28 cents per share, compared with a far deeper loss of US$4.4 billion or US$8.39 per share in the same period a year ago.

On an adjusted basis, the smartphone maker delivered a small profit of $6 million, or one cent per share, beating expectations of an adjusted loss of five cents per share, according to data compiled by Thomson Reuters.

However, BlackBerry missed expectations on revenue, posting US$793 million versus analyst predictions of US$931 million, and down from $1.19 billion a year ago.

Shares of the company dropped 48 cents or 4.1 per cent at C$11.19 on the Toronto Stock Exchange. In New York, the company's stock traded down 5.8 per cent, or 58 cents, to US$9.49 on the Nasdaq.

During the quarter, BlackBerry recognized revenue on 1.9 million devices, compared to the previous quarter of this year when it sold 2.1 million phones.

The pullback offers another sign of shifting priorities at the company as services and software begin to eclipse the money it's garnering from handsets. During the period, 46 per cent of revenue came from phones, while another 46 per cent was from services it offers and eight per cent from software.

The slate of security technology and software under its belt is growing, after BlackBerry introduced a more secure version of BlackBerry Messenger and a virtual conference program called BBM Meetings are both offered to users for an additional fee.

"While we will make every attempt to stay profitable going forward, sustainable profitability can only come from revenue growth and that is certainly our strategy here," he said.

Chen aims to double its revenues from software in its next financial year, helped by the launch of the next generation of its BlackBerry Enterprise Service software, called BES12.

Earlier this week, BlackBerry launched the Classic model, a throwback to its popular older smartphones, but with an updated design and features.

Chen told analysts that early orders for the Classic "are ahead" of the Passport smartphone that was released three months ago. While Chen didn't provide sales figures for the Classic, about 200,000 Passport phones had been sold in its first few days of release, mostly through preorders, suggesting the Classic has sold more.

BlackBerry is also making some headway in bringing corporate customers back onto its side, Chen said. The company reported that 30 per cent of subscribers to its BES10 offering, which provides security and services for corporate users, came from other mobile device management competitors.

Part of that can be attributed to more enthusiasm from wireless carriers in North America and Europe who have been stocking the phones in their retail stores, Chen said.

"As those of you that follow us reasonably closely (know), this has not been something that we have enjoyed for a while," he said.

BMO Capital Markets analyst Tim Long said before the results were issued that he expected sales of the Passport would be offset by flagging sales of BlackBerry's older devices.

"We believe that management is controlling production carefully to avoid building inventory," he wrote in a note.

Looking towards next year, Long said he wants to see signs that BlackBerry is making money from software sales, which include pushing a more secure version of its BlackBerry Messenger service and a virtual conference program called BBM Meetings. Both are offered to users for an additional fee.

"We do not expect true indicators of this until February quarter results," Long noted.

On Friday, BlackBerry also announced it completed the acquisition of Secusmart, a German voice and data encryption firm to prevent eavesdropping.