The Importance Of The Department Of Defense Contract For BlackBerry

| About: BlackBerry Ltd. (BBRY)

BlackBerry (NASDAQ:BBRY) announced that DISA (the U.S. Defense Information System Agency) has given the BlackBerry Z10 and BlackBerry Q10 smartphones along with BlackBerry Enterprise Service 10, the Authority to Operate (ATO) on Department of Defense (DOD) networks. BlackBerry is the first Mobile Device Management provider to obtain an ATO.

I think the news is not a surprise to BlackBerry followers as well as those who have been following the DoD network project. Back in April (please consider: BlackBerry: The Killer Punch Will Be Security) I said I was pretty sure BlackBerry would be the company to get this contract.

The significance of this contract for BlackBerry is paramount. And believe it or not, the potential sale of 30,000 devices as well as the accompanied service revenue by the end of 2013, is the least of all benefits. The importance of this contract, is the fact that the DoD has chosen (so far) BlackBerry for its MDM needs.

Think of this for a minuet. If you are a serious enterprise customer that takes your security needs seriously, what MDM platform and devices would you choose? The DoD has done extensive security testing and due diligence and has put BlackBerry against he most rigorous security tests on planet earth. If you are an enterprise customer, why would you also not want the best there is?

So in a sense, if you are an enterprise customer, you really don't need to do the same due diligence yourself. The U.S. Department of Defense has already done the work for you and has given you the answer. So with BlackBerry now officially in the front door of the DoD, not only is this a two thumbs up for BlackBerry, but it is also a green light for many other organizations around the world to follow.

And in the long run, the numbers will add up. Think of how many governments around the world might potentially pick BlackBerry for their device, security and MDM needs? Think of how many foreign armed forces might also follow the DoD and also pick BlackBerry?

If you do the math, we are talking about a lot of devices and even more important, a lot of service revenue. Potential foreign government agency sales alone are several million. But why stop there? The U.S. Government with the many different branches of government, as well as the many local governments, also offer the potential for millions of device and service revenue sales. And the enterprise customer is many times over the above numbers.

Of course this revenue will not be achieved by BlackBerry overnight. This is a multi-year uphill battle and BlackBerry will be running a never-ending Marathon. However, it is important to note that the DISA contract will open many doors for BlackBerry in the long run, even if it never becomes as big as Apple (NASDAQ:AAPL).

And because government agencies and armed forces (both U.S. and foreign), are high value enterprise customers, and take their security and MDM management needs very seriously, I think that BlackBerry will not have a problem selling devices and services for top dollar.

So while so far BlackBerry has yet to thrill investors, I think this contract, as well as the acknowledgment that BlackBerry has satisfied the most serious security minded customer in the world -- the DoD -- should be a long-term buy signal for BlackBerry, even if it does not meet market expectations in the short term.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. 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.