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:US)’s iOS software and Google Inc. (GOOG:US)’s Android operating system.
BlackBerry rose as much as 12 percent. It was trading 8.1 percent higher at $9.82 at 11:35 a.m. 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 had gained 22 percent this year through Jan. 17.
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.
“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.
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.
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