(Adds detail on costs, hardware business, CEO comment)
TORONTO, March 28 (Reuters) - Smartphone maker BlackBerry Ltd reported a much smaller-than-expected quarterly loss on Friday, prompting investors to push its share price higher, despite its revenue and smartphone sales continuing to slide.
The company, whose devices have lost ground to Apple Inc's iPhone and smartphones powered by Google Inc's Android operating system, has been cutting costs as it pushes for a turnaround.
Research and development expenses fell 24 percent in the fourth quarter from a year earlier, while selling, marketing and administration costs dropped 35 percent.
Morningstar analyst Brian Colello said operating expense reductions were encouraging, to a point.
"The big question still remains what BlackBerry can do on the demand side," he said. "A lot of their moves have been supply related and internal, but we're still looking for strong signs that demand is improving."
Shares of BlackBerry, whose global smartphone market share was below 1 percent at the end of 2013, climbed around 5 percent in early New York Stock Exchange trade as investors were buoyed by better-than-expected results. They slipped back to trade up 2.1 percent at $9.24.
Under the leadership of new Chief Executive John Chen, the Canadian tech company is focusing on its services arm, which manages mobile devices on the internal networks of big clients.
The share of BlackBerry's revenue from hardware continued to decline in the quarter, to 37 percent, from 40 percent in the third quarter and 61 percent in the fourth quarter of last year.
However, its newer BlackBerry 10 phones have not lived up to high expectations. After heavily promoting several devices with touch-screen keyboards, the company is returning to its roots, emphasizing the physical keyboards its most loyal fans covet.
Last month BlackBerry unveiled a new "classic" model with a keyboard. Chen told Reuters in an interview that BlackBerry was designing three new keyboard-centric devices and would probably introduce them in the next 18 months.
On Friday's conference call, Chen said the company was set to begin a new production run of its Bold devices that run on the older BlackBerry 7 platform, as demand for them remains strong.
The company said it had recognized hardware revenue on about 1.3 million BlackBerry smartphones during the fourth quarter, compared with about 1.9 million devices in the third quarter.
It also said about 3.4 million devices were sold through to end customers, and this included shipments made and recognized before the fourth quarter. The company said 68 percent of these devices were BlackBerry 7.
Its net loss was $423 million, or 80 cents a share, for the fourth quarter ended March 1. That compared with a year-earlier profit of $98 million, or 19 cents a share.
Revenue fell to $976 million from $2.68 billion. Analysts on average had been expecting $1.11 billion, according to Thomson Reuters I/B/E/S.
Excluding restructuring charges and other one-time items, the company reported a loss of 8 cents a share. The analysts' average estimate was a loss of 55 cents.
(Additional reoprting by Leah Schnurr in Toronto; Editing by Chizu Nomiyama, Jeffrey Hodgson and Sophie Hares)