BlackBerry Surges After Protecting Turf in Defense Agency

BlackBerry Ltd. (BB) shares surged as the U.S. Defense Department said its smartphones will be the primary device supported on a new network, showing that rivals are finding it difficult to unseat the longtime government supplier.

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

BlackBerry rose 9.4 percent to $9.93 at the close in New York. The company’s Canadian shares had already jumped 8.2 percent yesterday in Toronto while U.S. exchanges were closed for Martin Luther King Jr. Day. After tumbling 37 percent last year, the U.S. shares have gained 33 percent this year.

The Waterloo, Ontario-based company is counting on loyalty from customers like the U.S. government after losing market share to Apple and Android devices for years. Its smartphones hadn’t been able to match the same features and range of consumer-focused applications of the iPhone or Samsung Galaxy.

John Chen, who took over as chief executive officer in November, is reorienting the company back to its core of business and government users, pledging to predominantly make models fitted with BlackBerry’s traditional physical keyboard in the future.

The Pentagon’s statement shows that Samsung Electronics Co. (SMSN), the biggest maker of Android devices, and Apple aren’t making the inroads into military smartphone sales that many expected because they can’t always meet the security specifications the Defense Department wants, said Doug Pollitt, a broker at Toronto-based Pollitt & Co.

Unclassified Documents

“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 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, declined to comment on the statement.

‘Ample Liquidity’

Today’s gain follows a 6.1 percent advance for the U.S. shares on Jan. 17 after Citron Research published a report calling for the stock to climb to $15.

“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.

BlackBerry is poised to add to its cash reserves with a deal announced after the close of trading today to sell most of its Canadian real estate. In partnership with Los Angeles-based CBRE Group Inc., BlackBerry will sell vacant and occupied property and then lease back buildings it needs, the company said in a statement. The sales include more than 3 million square feet (280,000 square meters) of space, BlackBerry said.

“This initiative will further enhance BlackBerry’s financial flexibility, and will provide additional resources to support our operations as our business continues to evolve,” Chen said in today’s statement.

The stock climbed as much as 6.4 percent in late trading after the company disclosed the real-estate plans.

To contact the reporter on this story: Hugo Miller in Toronto at hugomiller@bloomberg.net

To contact the editors responsible for this story: David Scanlan at dscanlan@bloomberg.net; Nick Turner at nturner7@bloomberg.net

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