The German Government Might Give An Unexpected Boost To BlackBerry

| About: BlackBerry Ltd. (BBRY)

In an interesting twist of events, the German government has decided that official matters of state are too important to be held on just any phone, ever since the NSA eavesdropping scandal surfaced. The interior ministry of the CDU (Christian Democratic Union) and the SPD (Social Democratic Party) have decided on "urgent" guidelines for ministers' and top ranking officials using mobile phones.

According to German site (quoting Bild), the iPhone will no longer be a device that will handle "official correspondence." The BSI (Bonn federal office for information security) has drawn up guidelines and phones used by the government must be BSI approved.

And since the software developed by the BSI is not compatible with Apple's (NASDAQ:AAPL) iPhone, the conclusion of many observers is that soon iPhones will start disappearing from the German Parliament.

Spiegel reported a while ago that the German Chancellery and government ministries switched to newly developed crypto mobile phones that have been approved for use by officials in Berlin since September. So far, no foreign intelligence agency has succeeded in breaking the encryption on the phones, the German Interior Ministry claims.

The German firm Secusmart turns BlackBerry (NASDAQ:BBRY) devices into ultra secure devices by installing an encryption engine via a micro SD card. Once installed, BlackBerry phones meet NATO requirements for classified communications.

And for all the fuss about Merkel's phone being bugged, CEO Hans-Christoph Quelle of Secusmart said:

The high security solution from Secusmart for secure communication within the government was not affected. The Secusmart company's encryption technique was developed together with security experts at the BSI (The German Federal Office for Information Security) and their security is openly documented. It's based on the Secusmart Security Card, a micro SD card with an integrated SmartCard chip. This miniature crypto-processor takes care of the encryption of voice and data communication within the mobile phone including authenticating calling parties. Its 128-bit AES encryption enables 340 sextillion different keys-imagine 36 zeros after the number 340.

Theoretically, it would take 149 billion years to crack this code based on today's technical standards, even with the use of special computers. The universe itself isn't even that old. That'll definitely keep the USA busy for a while.

According to sources, the German government has ordered about 40,000 BlackBerry Z10 phones so far, including one for Chancellor Angela Merkel. And if many people start using BlackBerry devices throughout the German government, this might lead to an intergovernmental trend towards Blackberry... one never knows.

However, while NATO has approved BlackBerry devices and BES10 server up to the level of restricted communications, it is unclear if NATO has obligated its members to use Blackberry devices or not, or if it has placed any orders.

While this development will not put a dent in Apple's revenue, it might give a boost to BlackBerry and at the same time promote BlackBerry as a manufacturer for secure government issued devices going forward. As to how many other governments worldwide will follow the German government's initiative for safer communications is unclear at the moment, however we must at least conclude that many are looking into the matter.

But at least one more government has banned the use of iPads in cabinet meetings. As reported a while ago by the Telegraph, the U.K. government has banned the use of iPads in cabinet meetings, due to fears of foreign intelligence agencies spying on them. More specifically, this time the fear is not the NSA, but Russian and Chinese intelligence agencies.

While there is no mention of an iPhone ban, one has to conclude that the English government is at least looking into how the German government is currently handling the matter.

And while the German government has the BSI, the English government has the GCHQ, that has also given two thumbs up to Blackberry, saying Blackberry is the safest:

The BlackBerry Enterprise Solution from Research In Motion remains the only smartphone system to have been formally evaluated by CESG and is approved to protect material classified up to and including 'restricted,'" CESG said.

Currently it is unclear what the policy of the German government towards Google's (NASDAQ:GOOG) Android and Microsoft's (NASDAQ:MSFT) WP8 devices is. I am assuming that, while they are allowed to be used, they are not used for top classified conversations.

The bottom line

Granted BlackBerry's restructuring in still ongoing and we still don't have a clear direction on how the new management will proceed, but it is clear that BlackBerry still has the edge when it comes to providing safe communications at the most restricted level. I for one think that this should be exploited by BlackBerry and that these services should command a premium and not sold at a discount.

If BlackBerry can exploit the demand for safe government communications, at the very least, that can provide the yeast for a recovery, while the company refocuses on its retail efforts down the road. And while I do not know if BlackBerry will be successful at this, at least BlackBerry still has the lead over everyone else. And at today's valuations, I for one think that this edge -- that might lead to a recovery -- is worth the risk.

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.