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Updated from 8:04 a.m. EDT to provide commentary from the conference call in the third paragraph.



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reported a surprise fourth-quarter profit and said it expects to break even next quarter, as the company continues to cut costs and implement its turnaround strategy.

BlackBerry earned 22 cents a share on $2.7 billion in revenue. Analysts polled by

Thomson Reuters

expected BlackBerry to post a loss of 29 cents a share on $2.84 billion in revenue. Analysts surveyed by


were looking for a loss of 29 cents a share on sales of $2.85 billion.

About 61% of the $2.7 billion in sales came from hardware, while 36% stemmed from services, and 3% came from software and other revenue. Helping the earnings were improved gross margins, which rose to 40%, as average higher selling prices and hardware margins improved during the quarter. That rose sharply from the third quarter, when gross margins were 30.4%.

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The Waterloo, Ontario-based company said it shipped about 6 million BlackBerry smartphones, including 1 million BlackBerry 10 smartphones and approximately 370,000 BlackBerry PlayBook tablets. Approximately 55% of the BlackBerry 10 users came from other platforms, CEO Thorsten Heins noted on the conference call. The company ended the quarter with a subscriber base of 76 million, down from 79 million in the third quarter.

On the conference call, Heins talked about expanding the BlackBerry 10 operating system into other platforms, but did not specify which ones.

For the first quarter, BlackBerry noted it will increase its marketing spending to support BlackBerry 10 by 50%. Despite the added expense, BlackBerry expects it will report break-even financial results in the first quarter, as margins improve and its cost structure continues lower. Analysts polled by

Thomson Reuters

are looking for a loss of 10 cents a share on $3.28 billion in revenue.

BlackBerry also announced that Mike Lazaridis, having fulfilled the commitment he made to the board in January 2012, decided to retire as vice chair and a director of the company.

While initial reports of Z10 sales have been mixed, with strong sales in Europe and Canada, but mixed in the U.S., Heins noted that more than 40 carriers are currently testing the Q10 QWERTY phone. BlackBerry has a strong QWERTY subscriber base, and "that will go strongly into that BlackBerry base," Heins said.

Shares of BlackBerry are trading higher in pre-market, up 1.26% to $14.75.


Written by Chris Ciaccia in New York

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