(Reuters) – BlackBerry Ltd would consider exiting its handset business if it remains unprofitable, its chief executive officer said on Wednesday, as the technology company looks to expand its corporate reach with investments, acquisitions and partnerships.

“If I cannot make money on handsets, I will not be in the handset business,” John Chen said in an interview, adding that the time frame for such a decision was short. He would not be more specific, but said it should be possible to make money off shipments of as few as 10 million a year.

At its peak, BlackBerry shipped 52.3 million devices in fiscal 2011, while it recorded revenue on less than 2 million last quarter.

Chen, who took the helm of the struggling company in November, said BlackBerry was also looking to invest in or team up with other companies in regulated industries such as healthcare, and financial and legal services, all of which require highly secure communications.

The chief executive said small acquisitions to strengthen BlackBerry’s network security offerings were also possible.

“We are building an engineering team on the service side that is focused on security. We are building an engineering team on the device side that is focused on security. We will do some partnerships and we will probably, potentially do an M&A on security.”

He said security had become more important to businesses and government since the revelations about U.S. surveillance made by former National Security Agency contractor Edward Snowden.

In a wide-ranging interview in New York, Chen acknowledged past management mistakes and said he had a long-term strategy to complement the short-term goals of staying afloat and stemming customer defections.

“You have to live short term. Maybe the prior management had the luxury to bet the world would come to it. I don’t have the luxury at all. I’m losing money and burning cash.”

In March, the embattled smartphone maker reported a quarterly net loss of $423 million and a 64 percent drop in its revenues, underscoring the magnitude of the challenge Chen faces in turning around the company.

Chen said BlackBerry remained on track to be cash-flow positive by the end of the current fiscal year, which runs to the end of February 2015, and to return to profit some time in the fiscal year after that.

Chen said his long-term plans for BlackBerry included competing in the burgeoning business of connecting all manner of devices, from kitchen appliances to automotive consoles to smartphones.

Chen said he was not sure how long it would take for the “machine-to-machine” or “M2M” world to become a mainstream business, but he said he was sure that was coming.

“We are not only interested in managing BlackBerry devices. We are interested in managing all devices that you would like to speak to each other,” he said. “To achieve our dream of being a major player in M2M requires more partnerships with others,” including telecom companies eager to participate.

FOCUS ON ENTERPRISE BUSINESS

Chen, viewed by tech industry insiders as a turnaround artist, wants BlackBerry to zero in on its core base of corporate and government clients, and on its services arm, which secures mobile devices on the internal networks of big clients.

Chen was credited with turning around Sybase Inc in the late 1990s. Sybase, an enterprise software company, was eventually acquired by SAP AG in 2010.

Canada’s BlackBerry, which has lost most of the smartphone market to Apple Inc’s iPhone and gadgets powered by Google Inc’s Android operating system, has laid off about 9,500 employees, or more than half its work force over the last three years, as it has rushed to cut costs in the face of mounting losses.

The company, a one-time pioneer in the smartphone arena, has seen its fortunes fade dramatically within a span of less than five years. BlackBerry, which boasted a global smartphone market share of roughly 20 percent back in 2009, has since seen that share shrink to less than 2 percent as of the end of 2013.

Chen, who joined BlackBerry after it was unable to find a buyer in a sale process last year, said he was not fazed by recent acquisitions of companies offering similar services, such as Facebook Inc’s $19 billion purchase of mobile messaging service Whatsapp.

“We are not going to go up against Whatsapp. We are going to be more focused on secure communications, secure messaging,” he said of BlackBerry’s BBM platform.

Chen said he was determined not to lose focus on the corporate and other customers that helped it build its global reach in the first place, and would not be tempted back into the much larger but more fickle consumer smartphone race.

“We are not going to spend any more money to maintain the latest version of Angry Birds,” Chen said, referring to a wildly popular consumer mobile videogame.

BlackBerry Ltd. (BBRY)’s John Chen is giving himself two years to overhaul the smartphone maker and offset declining handset demand with sales of software that connects computers with all manner of machines, from cars to heart monitors.

Chen, who took over as chief executive officer in November, is stepping up BlackBerry’s reliance on business customers instead of the smartphones that made the company famous. In the worst-case scenario in which he misses his goal of generating cash flow by this fiscal year, Chen said he’ll have six to eight quarters to replace declining hardware sales with higher-margin software revenue.

“I don’t have a plan to get rid of handsets, I have a plan to not be dependent on handsets,” Chen said yesterday in an interview at Bloomberg’s headquarters in New York. “All I need to do is replace the handset revenue, and this company will be very different.”

The shift is the key to Chen’s goal of returning the money-losing company to profit by the fiscal year that ends in March 2016. Chen is in a race against time with device sales continuing to slide — 77 percent last quarter alone from a year earlier. His plan to create fresh revenue streams from its QNX software and BBM instant-messaging services has been welcomed by investors who’ve driven the stock up 23 percent since he took the helm after a failed sale process.

QNX Purchase

BlackBerry bought QNX in 2010 for $200 million from Harman International Industries Ltd. and set about building a new smartphone operating system, BlackBerry 10, on the software. It’s already widely used in cars and industrial settings like coal mines and hospitals. Now Chen wants to make it more prevalent anywhere machines need to communicate with other machines.

“This is where the industry is going,” Chen said. “It’s all about device interaction. This is why it’s so important to be agnostic.”

Chen said that by replacing single-digit phone margins with software margins that are routinely 70 percent to 90 percent, BlackBerry can be profitable with the same level of revenue. Chen reiterated yesterday that he expects the Waterloo, Ontario-based company to stop losing cash by the end of this fiscal year.

The company is focused on supplying both software and hardware to customers in regulated industries such as finance, government, health care and law who need security, risk management and high productivity, Chen said. About 80 percent of BlackBerry’s installed base of smartphone customers are in a regulated industry, and an even higher percentage of customers dependent on its servers are in such a field, he said.

Restoring Value

Emphasizing this core base of users and technology that caters to them “will be the best way to capture and reverse the decline of our value,” he said.

Chen took over after a plan to sell BlackBerry and take it private had collapsed. He said that he’s focused on making BlackBerry competitive again, not selling the company at a distressed price.

“I’m not running the company for a sale,” Chen said. “I’m running the company to generate value, to grow the business.’

He pointed out that he ran Pyramid Technology Corp. for five years before he sold it and Sybase Inc. for 12 years before SAP AG (SAP) bought it for $5.8 billion in 2010.

Chen inherited a company that had already been losing smartphone market share to Apple Inc. and Samsung Electronics Co. for years. As recently as late 2010, BlackBerry claimed 19 percent of the global smartphone market, according to IDC. By December of last year, it had slipped to 0.6 percent.

T-Mobile Fallout

As the company shifts its emphasis to supplying software and services, Chen recently decided to end BlackBerry’s partnership with T-Mobile US Inc.

In February, T-Mobile started offering to swap new iPhones for old BlackBerrys. Last week, Chen said he won’t renew the supply agreement with T-Mobile, the fourth-largest U.S. wireless carrier, saying that their strategies are ‘‘not complementary.”

“What kind of business person am I when I knowingly am giving a license for a company to move my customers away?” Chen said yesterday in the interview.

Severing ties with BlackBerry critics, cementing loyalties with other carriers and bringing back the older and popular BlackBerry Bold phone have been among the latest steps in Chen’s efforts to restore faith in the company.

“It was easier to do this with T-Mobile,” he said. “They are clearly focused on consumers, and I’m clearly focused on enterprise. So this is a different conversation if it was AT&T (T) or Verizon. (VZ)”

In recent weeks, BlackBerry also has taken legal action to try to stamp out product leaks and just won a court order convincing a judge that Typo Products LLC probably infringed its patents with its clip-on keyboard.

The move to cut ties with T-Mobile wasn’t emotional, he said. It was to send a signal.

“I wanted to make sure the world knows that we are not going to let people push us around,” Chen said.