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BlackBerry's Big Pentagon Win Was Only a Mirage

Earlier this week, shares of BlackBerry (NASDAQ: BBRY  ) surged more than 12% higher on reports that the Pentagon still loves its secure smartphones with hardware keyboards. The Department of Defense supposedly "supports 80,000 BlackBerry phones," far ahead of Apple (NASDAQ: AAPL  ) iPhones or Google (NASDAQ: GOOGL  ) Androids. The two leading mobile consumer platforms only add up to about 1,800 devices on the DOD network.

It's not that a single order of 80,000 units would have turned the tables for BlackBerry. Apple routinely ships millions of iPhones in a given quarter, and Cupertino is the underdog to Android volumes on a global level. But having Pentagon's engagement in a public statement could have fueled a comeback of sorts, building a raft of new orders around the professed trust of the planet's most advanced military. If nothing else, it's a good start to potentially better days.

However, BlackBerry investors didn't read the fine print. Those 80,000 BlackBerry phones weren't new orders, but simply a rash of leftovers from the Canadian company's glory days.

A few thousand of these aging devices do not a turnaround make.

The original press release breaks out a plethora of specific device names for the circa 2,000 non-BlackBerry devices in use, from the aging Apple iPhone 4S to the far newer iPad 4. But it doesn't break down the specific BlackBerries in action. The bulk of these are probably older versions, not the BlackBerry 10 smartphones that were supposed to save the company's bacon.

And a Pentagon spokesman confirmed the lack of new BlackBerry orders in an email to The Verge:

Absolutely no new orders have been placed for new BB devices. The DISA press release put out January 16 never alluded to any devices being purchased. The 80,000 BBs and 1,800 non-BB devices referenced in the release are legacy systems already in DOD inventories.

So BlackBerry shares plunged as much as 8% on this revelation. Investors hate having the rug pulled out from under them, especially when they're resting on seemingly spectacular news.

John Chen, BlackBerry's new CEO, does seem to have his head screwed on straight and might be able to save the flagging company from certain doom. But the game is rigged against him, and his victory will probably be Pyrrhic at best. "If we are victorious in one more battle with Apple and Google, we shall be utterly ruined."

I wouldn't recommend buying BlackBerry shares these days, other than with poker chips and money dog-eared for gambling adventures. Investing isn't quite the right word here.

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Read/Post Comments (7) | Recommend This Article (2)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On January 24, 2014, at 9:47 AM, Waldo wrote:

    Ask not for whom the bell tolls BBRY, it tolls for thy!

    (sent from my iPad)

  • Report this Comment On January 24, 2014, at 10:38 AM, etgh wrote:

    With Apple and Google running the smartphone industry, comsumers can look forward to higher prices and leaky phones for the foreseeable future.

    The Pentagon needs to retain the BBerry's because of national security concerns but cannot deny the leaky Apple and Google phones due to the political pressure these two tech giants can apply.

    ...and many good folks may die as a result.

  • Report this Comment On January 24, 2014, at 12:36 PM, speechisntfree wrote:

    "BlackBerry's Big Pentagon Win Was Only a Mirage"

    as is the thought of finding any coherent thought on this website.

  • Report this Comment On January 24, 2014, at 12:40 PM, kevinish wrote:

    Not a 'Mirage'; just analyst that can't read a press release. The announcement never stated they were 'buying' anything. The key point of the announcement is that The Pentagon is approving 80,000 BB devices, and giving only limited, non-secure access to a paltry 1800 IOS and Android. And, oh by the way, the NSA pretty much determined that IOS and Android are wholly compromised, and unsuitable for secure communications. One would expect that eventually, the Fortune 1000 will connect the dots from this announcement and the tens of millions of dollars lost in lawsuits last year due to confidential data lost on BYOD. And, once corporate america catches on, it shouldn't take 'financial analysts' more than another year or so to get it. Maybe.

  • Report this Comment On January 24, 2014, at 12:43 PM, infektu wrote:

    Wow, did anybody really think that the good news for BBRY in this the Pentagon story was 80k units, give or take ?!?

    It was all about security and brand name, since 80k brand spanking new BB10 units could bring maybe 8M (or 80k$) net. But who needs math when playing the stock market?

    Now the WS effect of the story was 100M shares x $2 ... judge for yourselves whether this has some/little/nothing to do with reality.

  • Report this Comment On January 24, 2014, at 2:35 PM, cbglobal wrote:

    LOL! The pentagon story was an unconfirmed rumor from the very beginning.

    Just like the one that Steve Jobs is alive and living on that island from the TV show lost where the magic waters cured his cancer.

    The important part was that the pentagon is sticking with Blackberry, regardless of how many phones.

    Since the stock has dropped $800 million on 80,000 phones, then each Blackberry in use is worth $10,000. Even bigger LOL

  • Report this Comment On January 24, 2014, at 5:37 PM, sleepngbear wrote:

    YOU guys are the ones who turned the Pentagon 'hooking up 80K phones' into 'purchasing 80K phones'. If you all weren't so lazy and incompetent, the right story would have gotten out in the first place. I can't even LOL at this ... I can only SMH.

    As has already been noted here, 80K devices means nothing either way. The real story is the vote of confidence given to BlackBerry (not to mention the vote of no confidence given to the others), particularly in regards to security. Any company that places an ounce of importance on security and may be on the fence about sticking with BlackBerry will hopefully see this as a reason to stay with them.

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Anders Bylund

Anders Bylund is a Foolish Technology and Entertainment Specialist. Where the two markets intersect, you'll find his wheelhouse. He has been an official Fool since 2006 but a jester all his life.

Hypoallergenic. Contains six flavors not found in nature. Believes in coyotes and time as an abstract.

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