BlackBerry Reveals New Government-related Subsidiary

- March 13th, 2019

BlackBerry’s new division will accelerate existing cybersecurity software operations for the US federal government.

BlackBerry (NYSE:BB,TSX:BB) announced on Tuesday (March 12) that it is establishing a new wholly-owned subsidiary called BlackBerry Government Solutions.

The division was created to further strengthen the company’s Federal Risk and Authorization Management Services. This includes BlackBerry’s ATHoc crisis communication system, which is a provider for 70 percent of US federal employees (over 1.1 million licensed users), including the Department of Energy and the Department of Homeland Security.

The subsidiary will be headquartered in Washington, DC with Rear Admiral Robert “Bob” E. Day, Jr., U.S. Coast Guard (Ret.) appointed president of the division. Day, Jr. has worked with BlackBerry since 2016.

BlackBerry Government Solutions will filter through many subsets of US federal agencies. Their services include secure document collaboration, secure real-time chat, a federated emergency platform, government to government exchanges (G2G) and government to citizens (G2C) interactions. To meet the stringent requirements of the US government, the new subsidiary will target its activities to meet these standards, including operations using cloud computing.

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According to a study published by McKinsey, an estimated US$1 trillion will be created in economic activity to improve governmental operating efficiencies. Take one example, where the United Kingdom has began digitizing its voter registration program in addition to 25 other basic services. In Norway, citizen’s tax returns are already filled out by the tax administration department. Research from the Accenture Public Citizen Survey shows that “2 in 3 citizens support artificial intelligence for faster tax refunds, virtual reality to better manage retirement, cross-agency data sharing to increase border safety, and a single online portal to access all their public services on one platform.”

Also on Tuesday, NATO  announced that it will be integrating BlackBerry’s SecuSUITE® for Government voice encryption technology. The NCI Agency division of NATO, which is centered on preventing cybersecurity attacks, will apply this software to secure the conversations between NATO leaders at home, abroad or at work. NATO encompasess 29-member nations with headquarters in Brussels, Belgium.

Further bolstering BlackBerry’s software services, the company acquired California-based Cylance in February 2019 for US$1.4 billion to enhance the company’s AI-driven cybersecurity capabilities this year. “Cylance’s leadership in artificial intelligence and cybersecurity will immediately complement our entire portfolio,” CEO John Chen said in a release.

The company’s third quarter results in December showed a record non-GAAP 14 percent increase year-over-year for software and services revenue, totaling US$217 million. Fourth quarter and year-end results are scheduled to be released March 29.

Shares of BlackBerry on Tuesday  slightly increased on both Canadian and US exchanges. On the New York Stock Exchange (NYSE) BlackBerry opened at US$9.32 and closed at US$9.33. Volume on Wednesday (March 13) was over three million with a total market capitalization of US$5.30 billion.

On the Toronto Stock Exchange (TSX), BlackBerry’s shares opened at C$12.50 and closed at C$12.60 with a volume of over 1 million and a market capitalization of $6.92 billion on Wednesday (March 13).

Analyst consensus on TipRanks set an average price target of US$10.10 for BlackBerry on the NYSE . On the Canadian exchange, analysts set C$14.00 as the average price target, which is an 11.20 percent upside to its current price.

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Securities Disclosure: I, Dorothy Neufeld, hold no direct investment interest in any company mentioned in this article.

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