NSA Approves BlackBerry Ltd To Encrypt Texts, Phone Calls For Govt.

BlackBerry is best known for its encryption services, and this is what has helped the Canadian firm cut a very important deal. On Thursday, the company informed investors that it has won a contract with the U.S. federal government for encryption tools for phone calls and text messages.

BlackBerry shares

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NSA approves BlackBerry products

More importantly, the deal gives BlackBerry products an endorsement from the National Security Agency, notes Reuters. Before endorsing the deal, the NSA’s National Information Assurance Partnership (NIAP) examines commercial technology products to make sure that they are fit for government use. Previously, NIAP has approved tools from Samsung and Apple.

“SecuSUITE for Government has also achieved Common Criteria certification under the National Information Assurance Partnership (NIAP) program. This makes it the only NIAP-certified voice solution supporting iOS, Android, and BlackBerry 10 devices,” the Canadian firm said in a blog post.

According to BlackBerry, its encrypted voice and text messaging products have been approved by governments in 20 countries, including Southeast Asia, Europe, Africa, Latin America and Germany (its biggest government customer). The tools offered by BlackBerry are based on the technology from German startup Secusmart, which the Canadian firm acquired a few years ago. It was Secusmart that was previously entrusted with encrypting German Chancellor Angela Merkel’s cellphone following the allegations from a former U.S. intelligence contractor that her phone was tapped by the NSA.

What to expect with BlackBerry shares

Following the news, BlackBerry shares were up in the morning. The stock has long been hovering around the $10 mark, raising concerns among investors about what to expect next. At their peak about a decade ago, BlackBerry shares were trading at about $230, giving the company a market cap of over $100 billion. However, now its market cap is closer to $5 billion. After being beaten by the likes of Apple and Samsung in the smartphone game, the company is now working to establish itself as a software firm with a focus on secure messaging and fleet management.

A couple of months ago, investors cheered the company when it won an $814.9 million arbitration case against Qualcomm, but the disappointing earnings last month again pushed BlackBerry shares back down. For the May quarter, the Canadian firm posted revenue of just $235 million, down from $400 million last year.

If the payment from Qualcomm is excluded, the company had negative cash flow last quarter. However, analysts are not concerned about it.

“We expect this to normalize over the coming quarters as the company completes its hardware exit over the coming quarters,” said Daniel Chan of TD Securities previously. For the full year, the company expects to have positive free cash flow.

Though the TD Securities analysts expect the next couple of quarters to be weak for the company, they were encouraged by management’s guidance of 10% to 15% growth in software and services revenue for the full year.

“It’s going to be more of a second-half growth, I think,” CEO John Chen said during the conference call with financial analysts on earnings day.

At 10:49 a.m., BlackBerry shares were up 0.49% at $10.19. Year to date, the stock is up almost 48%, while in the last year, it is up almost 51%.



About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at amanjain@valuewalk.com