Security is by far the biggest reason to buy and hold BlackBerry (NASDAQ:BBRY) stocks for the long term. Historically, most Governments, Corporations, and Mission Critical Organizations have preferred BlackBerry's secure smartphones and Enterprise Solutions to protect the information they have on their networks from the prying eyes of outsiders.
However, the recent trend of BYOD (Bring Your Own Device) policies (where companies allow employees to use their own personal device in the workplace) is changing the security needs of organizations. Employees are bringing Apple (NASDAQ:AAPL), Samsung, Nokia (NYSE:NOK), and Google (NASDAQ:GOOG) devices to work. Who knows where those devices have been or if they have been corrupted. BYOD has also introduced new issues such as unsecured operating systems, unsecured manufacturing, and the ease of access to the internet leaves them open to hacking and malware. These cracks in security have started to make it easier for spies and hackers to get access to information not meant for their eyes.
A recent headline read "Obama, China's Xi to discuss cyber security in June meeting." This article on Yahoo News taken from a story on Reuters outlines how Chinese hackers have gained access to many U.S. Military Networks and stolen information or plans that are top secret.
Among the weapons listed as compromised were the advanced Patriot missile system, the Navy's Aegis ballistic missile defense systems, the F/A-18 fighter jet, the V-22 Osprey, the Black Hawk helicopter and the F-35 Joint Strike Fighter.
The Australian Government also alleges in another article that Chinese Hackers gained access to the plans for the Australian Spy Agency Headquarters giving them easy access to every corner of the building and the secrets it holds.
How are these hackers getting access? Well that is way above my pay grade, but if I was a spy or hacker I would look for the easiest method.
Could a smartphone with an open source operating system that I could modify and install my virus, malware, or spy-ware onto be an easy way for a hacker to get access to a secure network?
It would be easy for a spy to install a chip with a back door in an unsecure manufacturing facility. This would give a hacker access to all communications going in and out of a CEO's phone.
Or perhaps an eco-space that allows apps to be freely created and sold or downloaded without any policing or scanning. That would be a great way to spread a virus or malware.
Surely there are more methods than those listed above, but unfortunately they would all be opportune ways for a Hacker to gain access to any network for Government, Fortune 500, Police, EMS etc.
The Inspector General of the US Department of Defense is quoted in this article as follows, "The Army Chief Information Officer (NYSE:CIO) did not implement an effective cyber-security program for commercially purchased smartphones and tablets." reads a new announcement from the DOD IG. "Specifically, the Army CIO did not appropriately track [off-the-shelf devices] and was unaware of more than 14,000 [such devices] used throughout the Army." Can you imagine 14,000 unsecured iOS, Android, and Windows devices having access to the US government Networks? It would not be unfathomable that quite a few of these could be stealing secret information or reading top secret communications.
Now, here is where BlackBerry's strength lies, it has one advantage over all other smartphone or tablet manufacturers. The BB10 operating system and all of its devices have been designed from the ground up to be secure first before anything else. In the design world they would say, "Form follows function." In the BlackBerry world they say "Form and function follow security."
In fact, BB10 devices are the only devices approved as is. iOS and Android devices are only approved for the DOD with quite a few features or browsers (such as iTunes, etc.) shut off or modified. On top of that, iOS and Android devices are only approved if they are controlled by a secure MDM solution of which (BES10) is already a part of the BlackBerry operating system. (More on that later.)
Even the recent security flaw found in the Wi-Fi systems' of Android, Windows, iOS and even BB7 devices is not a concern for BB10 devices. They have been designed to prevent this from the start.
BlackBerry has taken steps to reduce its supply chain exposure by reducing the number of vendors it uses so they can better implement security for the supply chain. They also are careful about which countries they manufacture in. Even one small crack in your supply chain can leave every device you make vulnerable.
Thorsten Heins (CEO of BlackBerry) states in this interview with the Washington Times, "Very frankly, that is why we are not building or manufacturing in China, as many of our competitors do, to really protect our software code and make sure the intellectual property of RIM is protected."
Group President Rob Enderle describes BlackBerry as the best secure solution out there in the marketplace today. In this Interview with Cyber-terrorism Analyst Morgan Wright, he talks about how easily a Samsung, HTC, Sony, Motorola, Google, or any Android phone can be attacked by a virus brought in by malware because of the open structure of the Android operating system and the number of versions there are of it.
Mr. Enderle describes how an Android phone can be tricked by malware to record key strokes, learn all your passwords, and read all your communications. Watch this video, it is an eye-opener. Unsecured phones can also be hacked to record conversations in Boardrooms, CEO offices, and even take pictures and videos without the user even knowing it.
BlackBerry not only has the handsets that are designed to avoid these intrusions, but they have created a BES10 MDM solution that will not only manage the security of a group of BlackBerry 10 devices but also work on approved iOS and Android devices.
Basically, the BES10 wraps all the iOS and Android Apps and Devices registered behind a secure firewall, keeping them separate as well as controlling the access of these devices. BES10 also allows the IT department to regulate the level of access depending on the requirement of the organization and ensures it stays within targeted protocols.
BES 10 has recently been awarded contracts with LA County Sheriffs Dept and New York City IT Department, both very security conscious organizations. It is also the choice of both AT&T and Verizon as the MDM preferred solution.
Because of this, BlackBerry has a very wide moat when it comes to security protecting the baseline market share it has today. That market share will continue in an upward trend as more and more intrusions, malware and viruses are discovered, reinforcing BlackBerry as the handset of choice. For those who insist on a BYOD policy, BES10 will provide the security for those unsecured iOS and Android devices and apps.
Executed well, this will mean that not only will BlackBerry have a growing device and service revenue stream for BlackBerry products and services, but they will also have a service revenue stream on everyone else's devices. For every company that uses BES10 MDM to control an organization's mobile devices, BlackBerry will be able to earn service revenue on each device in that organization.
Apple, Samsung, HTC, LG, Sony, Google and Motorola devices all will be earning revenue for BlackBerry. Android smartphones, Android tablets, iPhones and iPads will all be under the control of BlackBerry software, and adding profits to the bottom line of BlackBerry. Now that is what I call a business plan and a great reason to buy and hold BlackBerry.
The quarter ending this week will give us a glimpse into these revenues and how they are ramping up. Reporting is scheduled for June 28th.
I remain long in anticipation of some great numbers that will send the shorts running.
Disclosure: I am long BBRY. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.