Consumer Electronics

The Pentagon Just Saved BlackBerry From Total Oblivion


(Corrects the nature of the Pentagon's commitment to BlackBerry in the second graf)

For a while there, it looked as if BlackBerry’s (BBRY) market value was going to be eclipsed by ’90s-era R&B outfit Blackstreet. But on Tuesday, the Canadian company was extended a lifeline from U.S. taxpayers. The U.S Department of Defense is about to roll out a fancy new wireless network, and the primary device it wants to use on it are BlackBerry handsets.

The Pentagon is saying that more than 80,000 BlackBerrys will be supported on the new network, cementing the company’s dominance among defense workers. As a point of comparison, only 1,800 iOS and Android devices are to be initially supported on the new network.

The Defense Department isn’t enhancing its support for BlackBerry just to be contrarian; concerns about data security remain at least as high as ever, and BlackBerry is further along than such competitors as Samsung (005930:KS) and Apple (AAPL) when it comes to matching the requirements set by the Pentagon.

The move also validates BlackBerry Chief Executive Officer John Chen’s strategy of returning the company to its enterprise roots. BlackBerry began with a revolutionary product that took hold in large businesses and institutions until the rise of the iPhone pushed BlackBerry to focus on consumers. That was the worst idea ever, and now the company is trying to return to what it knows best.

Maybe BlackBerry should take this to its logical conclusion. Apple and Samsung are making big inroads in private industry, a market BlackBerry used to rule. Making up the lost ground there is probably too hard (particularly with employees telling IT departments what they want to use, not the other way around). But this defense contract raises the possibility that, just maybe, BlackBerry’s future is best secured as a defense contractor, or as part of one. Providing wireless communications to the armed services and other government agencies? That’s worked out all right for General Dynamics (GD), SAIC (SAIC), and L-3 Communications (LLL). It’s a lot better than some of BlackBerry’s other options.

Grobart is a senior writer for Bloomberg Businessweek and the managing editor of Bloomberg Digital Video. Follow him on Twitter @samgrobart.

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Companies Mentioned

  • BBRY
    (BlackBerry Ltd)
    • $10.89 USD
    • 0.14
    • 1.29%
  • 005930:KS
    (Samsung Electronics Co Ltd)
    • $1183000.0 KRW
    • -27000.00
    • -2.28%
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