BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) posted a disappointing third quarter loss of $0.67 a share on December 20. The Canadian company took $2.7 billion in asset impairment charges, $1.6 billion on inventory and $266K in restructuring charges, which adds up to $4.6 billion. BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) recognized revenue on only 1.9 million devices, and most of them were BB7. These pathetic results should have been enough to trigger a strong sell-off in BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) stock.

BlackBerry

BlackBerry CEO’s vision resonates with market expectations

But CEO John Chen seems to have touched the right points in his commentary, raising hopes of a miraculous turnaround of the struggling smartphone maker. Chen has overhauled BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) and made significant changes at the company. The newly appointed BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) CEO has changed the incentives for the sales force. He is working to align the company’s business around the needs of end-customers by focusing on BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s core strength. Mr. Chen said on Friday that he will be focusing on four core areas of business: enterprise services, messaging, QNX and device business.

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) announced a 5-year deal with Foxconn Technology Co., Ltd. (TPE:2354) to design and manufacture smartphones for the Canadian company. William Blair & Co. analyst Anil Doradla said in a research note to investors that it’s the first time in many years that BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB)’s management vision resonated well with market expectations.

Foxconn Technology Co., Ltd. (TPE:2354) has honed its capabilities by manufacturing iPhones, while meeting Apple Inc. (NASDAQ:AAPL)’s rigorous production and supply chain standards. The Taiwanese vendor has an unmatched scale, which helps it purchase components at much lower rates than BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) could ever think of. Foxconn Technology Co., Ltd. (TPE:2354) will be designing, manufacturing and supplying smartphones for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB). It will help the Canadian company bring down the costs substantially.

Initially, Foxconn Technology Co., Ltd. (TPE:2354) will produce a 3G BlackBerry smartphone for the Indonesian market. Though BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) has lost traction in the U.S. and Europe, it remains a strong brand in Asian countries such as Indonesia and India. But the Canadian company’s decision to make a low-cost smartphone means the company will have to engage in cut-throat competition with Android vendors such as ZTE, Huawei, Lenovo and Xiaomi Corp.

Uncertainty still looms around BlackBerry

BlackBerry Paradigm

Paradigm Capital analyst Gabriel Leung said in a research note to investors that the Foxconn Technology Co., Ltd. (TPE:2354) deal will help the Canadian company to improve its supply chain efficiencies and reduce the inventory risk because the Taiwanese company will be managing the inventory. He expects BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) to reach a neutral cash flow by the end of 2015, mainly due to the ongoing restructuring program. Despite John Chen’s positive first steps, Paradigm Capital remains skeptical, saying that executing the turnaround strategy will be a key challenge for BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB). Paradigm Capital has a Hold rating on the stock with a $7 price target.

BlackBerry Ltd (NASDAQ:BBRY) (TSE:BB) shares plunged 0.27% to $7.45 in pre-market trading Tuesday.