Blackberry gets new life from U.S. Department of Defense contract

BlackBerry may get out of the handset business, BlackBerry may get out of the handset business, its chief executive said Wednesday, April 9, 2014, concentrating instead on security. This is a BlackBerry 10 in 2013. Photo Credit: AP

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TORONTO - BlackBerry surged the most in a month after the U.S. Department of Defense said the company’s smartphones will account for 98 percent of devices in one of its new networks.

About 80,000 BlackBerrys and 1,800 phones and tablets based on Apple Inc.’s iOS software and Google Inc.’s Android operating system will start being hooked up to the Department of Defense’s management system at the end of this month, the Defense Information Systems Agency said in a statement last week.

After tumbling 33 percent last year, the stock has gained 37 percent this year.

The Waterloo, Ontario-based company has been losing market share to Apple and Android devices for years as its devices failed to carry the same features and range of consumer-focused applications as the iPhone or Samsung Galaxy range. John Chen, who took over as chief executive officer in November, is reorienting the company toward its core of business and government users, pledging to predominantly make models fitted with BlackBerry’s traditional physical keyboard in the future.

The report shows that Samsung Electronics Co., the biggest maker of Android devices, and Apple are not making the inroads into military smartphone procurement that many expected because they can’t always meet the security specifications the Pentagon wants, Doug Pollitt, a broker at Toronto-based Pollitt & Co, said by phone.

Unclassified documents

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“It’s a challenging specification and other vendors are having a tough time meeting it,” said Pollitt, whose brokerage owns shares of BlackBerry. “BlackBerry has already has got it.”

The defense agency known as DISA, which implements the U.S. military’s information technology policies, will introduce the first phase of a new system on Jan. 31 to make it easier for personnel to work on unclassified documents from wireless devices. A military app store will be included in the first phase and the program currently supports 16 mobile apps, according to DISA’s statement.

Adam Emery, a spokesman for BlackBerry, is looking into DISA’s statement and didn’t have any immediate comment.

The gain follows a 6.6 percent advance on Jan. 17 after Citron Research published a report calling for the stock to climb to $15 on the Nasdaq Stock Market. Trading today was closed in New York for Martin Luther King Day.

“BlackBerry has a healthy balance sheet, with ample liquidity to execute its turnaround strategy and make the necessary investments for growth,” according to the report. Citron added that while it more typically makes short-selling bets against a stock rather than a long position, this was not a time to bet against BlackBerry.

“It is suicidal to bet against well-capitalized strong management in the enterprise mobile space,” Citron said.

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