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Has the Pentagon just saved BlackBerry?

That ultra-secure network that vexed UK police during the riots is seen as a major advantage by the US government: it's just bought 80,000 handsets.

by Emma Haslett
Last Updated: 16 Jul 2014

Last year was a rollercoaster ride of emotions for BlackBerry: having begun the year by pushing back the launch of its Z10 handset, it then proceeded to make huge job cuts, issue profit warnings and agree to a  $4.7bn (£3bn) sale before skidding to a halt at the last minute and deciding to take $1bn of institutional investment instead.

But it looks like the long, drawn-out crumbling of BlackBerry could be about to come to an end, thanks to the US defence department, which today announced a deal to buy 80,000 BlackBerry devices.

This is all to do with the new high-security network about to be launched by the Pentagon. Apparently, the new network will focus on ‘mobility’ devices – and of the smartphones and tablets it’s agreed to buy, just 1,800 will be made by manufacturers other than BlackBerry. Presumably it's decided it doesn't want Google or the National Security Agency reading its emails...

Not surprisingly, BlackBerry’s share price jumped almost 10% on the news. We hardly need to say that it’s a huge vote of confidence for the ailing Canadian firm – but this isn’t benevolence on the US government’s behalf. BlackBerrys have ultra-secure encryption systems (so much so that in 2010, the Indian government threatened to ban the devices), which mean they’re perfect for those in the business of hiding data. This isn’t the first time the Pentagon has worked with the company: apparently, 90% of the 600,000 commercial devices already used by the US military are BlackBerrys.

The next challenge for BlackBerry is to make 80,000 devices in time, to order. Coincidentally, the company has just signed a deal to outsource manufacturing to Foxconn, the Chinese firm that assembles iPhones (and which has also been heavily criticised over its working conditions, but we’ll gloss over that…).

Could this be the beginning of the end of BlackBerry’s woes? It looks like new boss John Chen, who was appointed in November, has made a good start. Analysts certainly seem impressed.

‘BlackBerry today is a fundamentally different company from the old BlackBerry that investors were familiar with just a short few months ago,’ said Citron Research. Considering the context, that’s a glowing report, if ever we’ve heard one.

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