(Adds CEO comment on traditional smartphone business, reaction from analysts, updates share price)
By Euan Rocha and Alastair Sharp
TORONTO, April 1 (Reuters) - BlackBerry Ltd shares sank on Friday after it reported a larger-than-expected slide in fourth-quarter revenue which it blamed partly on disappointing sales of its new Android-based Priv smartphone.
The Canadian company's shares fell more than 6 percent in New York and Toronto as the weak results raised fresh questions about the viability of its traditional hardware business.
The smartphone industry pioneer lost its early lead to major rivals like Apple Inc's iPhone, and Chief Executive John Chen hopes to redesign the company around higher-margin software and services to manage mobile devices in the workforce.
But investors and analysts are skeptical the company can grow software sales fast enough to offset the dragging handset business and related fall in access fees from telecom companies.
"BlackBerry is slowly atrophying," said Ed Snyder, an analyst with Charter Equity. "Their big bank account allows them to slow things down but not change the direction."
Chen said if he can't make handsets profitable this year he would consider cutting the unit loose.
"If by September I couldn't find a way to get there ... then I need to seriously consider being a software company only," he told CNBC television.
The Waterloo, Ontario-based company recognized revenue on roughly 600,000 devices in the quarter. Chen said 3 million device sales a year at an average price around $300 would get the unit to break even. He had previously estimated BlackBerry needed to sell 5 million to achieve this.
Software and licensing revenue for the year came to $527 million, exceeding BlackBerry's target of $500 million.
The company said it expects 30 percent growth in that business this fiscal year, but even that failed to impress.
"We were looking for even faster growth," said Brian Colello, an analyst at Morningstar. "BlackBerry is going to need to grow this business at an extremely fast pace."
The company said organic software growth excluding contributions from its Good Technology purchase was 24 percent.
Overall revenue fell to $464 million from $660 million a year earlier and was about $100 million lower than the average of analyst expectations, according to Thomson Reuters I/B/E/S.
It reported a net loss of $238 million, or 45 cents a share, in the fourth quarter ended Feb. 29, compared with year-earlier profit of $28 million, or 5 cents a share. Excluding one-time items, it lost 3 cents a share, against expectations for a 10-cents-a-share loss.
(Editing by Bernadette Baum and Cynthia Osterman)