(Adds CEO and analyst comments, share price move)
TORONTO, Dec 20 (Reuters) - BlackBerry Ltd TO>, which gave up on a plan to sell itself last month, reported a massive quarterly loss on Friday, as sales of its smartphones shriveled and it booked asset impairment charges and inventory writedowns.
The company, which announced a five-year partnership with Foxconn Technology Co Ltd to develop and manufacture a handset for Indonesia and other emerging markets, conceded that its biggest challenge was still in its core handset business.
"While our enterprise services, messaging and QNX embedded businesses are already well-positioned ... the most immediate challenge for the company is how to transition the devices operations to a more profitable business model," said John Chen, who last month was named chief executive officer.
Chen has said he will not jettison the hardware operation and is counting on strong growth in its service business that manages smartphone traffic on the internal networks of corporate and government clients.
BlackBerry sold about 4.3 million handsets in the third quarter ended Nov. 30, including some shipped to suppliers earlier. Older BlackBerry 7 models account for about 3.2 million of the smartphones.
The company recognized hardware revenue on 1.9 million devices, down from 3.7 million in the prior quarter.
BlackBerry's cash pile grew to $3.2 billion from $2.6 billion a quarter earlier, but that included $1 billion raised by issuing convertible notes to a group of investors last month.
The Waterloo, Ontario-based company pioneered the concept of on-the-go email, and for years its pagers and phones were must-have devices for political and business leaders. But in recent years it has ceded its once-dominant market share to Apple Inc's iPhone and a slew of smartphones powered by Google Inc's Android operating system.
A new line of devices that run on BlackBerry 10 software has failed to gain traction, prompting the company to put itself up for sale earlier this year.
Last month, BlackBerry shelved the sale process and opted to refinance by issuing $1 billion in debt to a group of long-term investors, including its largest shareholder, Fairfax Financial Holdings.
Shares of BlackBerry were up 2.6 percent at $6.41 in trading before the market opened, after dropping as much as 7 percent soon after the results were announced. The stock has fallen roughly 47 percent this year.
The company reported a third-quarter net loss of $4.4 billion, or $8.37 a share, compared with year-earlier net income of $9 million, or 2 cents a share.
Excluding the inventory writedowns and impairment charges, the loss was $354 million, or 67 cents a share.
Analysts on average had expected a loss of 44 cents a share, according to Thomson Reuters I/B/E/S.
Revenue fell to $1.19 billion from $2.73 billion as increased uncertainty about the company's fate led to further sales erosion. Wall Street had forecast $1.6 billion.
Morningstar analyst Brian Colello said BlackBerry's turnaround strategy was more important than its latest operating results.
"I don't think it's a surprise that the revenue, operating margin and the business continues to decline," he said. "I think the bigger question is, what is the turnaround story at this point? They have a lot of different assets that could point the company in different directions."
(Editing by Frank McGurty and Lisa Von Ahn)