Could Boeing's Black Phone Generate Interest in BlackBerry?

Boeing's Black phone addresses a part of the market untouched by BlackBerry but could this entry into mobile lead to an acquisition?

Mar 3, 2014 at 10:30AM

BlackBerry (NASDAQ:BBRY) is facing numerous challenges as it tries to rise from the ashes, but Boeing's (NYSE:BA) Black phone isn't one of them. In fact, it may actually improve BlackBerry's chances of being acquired.

Boeing Black Phone

Boeing's Black Phone

Boeing's Black phone is ultra-high-end
On Feb. 24, Boeing's attorney filed paperwork with the FCC describing a handset that sounds like it could have been developed by James Bond's Q branch. According to the documentation, Boeing's Black phone was developed to ensure that government agencies' and contractors' data and voice communications are transmitted and stored in a secure manner. The documents go on to describe how there are no serviceable parts and any attempt to tamper with the device will cause it to self-destruct.

BlackBerry's claim to fame has been its focus on security. Over the years, it has been the primary vendor for government agencies. When President Barack Obama took office, he insisted on keeping his BlackBerry, and since then, it has presented no disclosed problems. In the last few years however, BlackBerry's visibility has been slipping as some government agencies have shed its devices for higher-priced, but more feature-rich Apple (NASDAQ:AAPL) iPhones. Two years ago, for instance, the ATF replaced 3,800 devices because the functionality lagged behind the iPhone and the maintenance cost of the infrastructure was too high.

Sub-$200 handset is more competitive
Now that BlackBerry can offer a sub-$200 smartphone, it may be able to win back some of the lost agencies that are price-sensitive to the $600 iPhones. Even though the agency does not have to pay the full cost upfront, the cost difference is passed through to the customer over the life of the contract.

BES10 free upgrades may help win back customer loyalty
The handset premium isn't the only cost reduction. BlackBerry has offered a robust mobile management system called BlackBerry Enterprise Service, or BES, that facilitates cross-platform device management. The problem with this solution has been the cost. In the past, BlackBerry had its customers locked in and took advantage of the situation by charging a premium price. However, the company recently announced a new program for its enterprise server customers that offers free migration to BES10. The low cost of handsets, combined with simplified low-cost management, may close the gap for companies that are willing to consider BlackBerry as an option.

BES could manage the whole infrastructure
What does all this have to do with Boeing's Black phone? BlackBerry can address what Boeing is leaving on the table and manage it. BlackBerry handsets are geared to the corporate side of government, where cost is a significant consideration, in addition to security. Boeing's Black phone is geared to a much smaller number of users where cost is not the primary concern. You still need to manage these handsets. It wouldn't be viable for a third-party solution to manage Boeing's Black phones, but if Boeing were to buy BlackBerry for the handset and BES businesses, it would be able to offer a management platform that could handle all types of devices. Boeing isn't the only company that this might appeal to. General Dynamics offers a handset called the Sectera Edge, which offers secure access to classified networks.

Transactions could be cheap if BBM and QNX are spun off
Since these two government contractors would not need BlackBerry's ancillary businesses like Messenger or QNX, these could be spun out to pay for the acquisition. If BlackBerry could get a comparable price per user for its BBM business to what WhatsApp received from Facebook -- $40 per user, times 80 million users -- it would amount to $3.2 billion, or 60% of the BlackBerry's market capitalization.

If we could buy only one stock in 2014, this would be it
There's a huge difference between a good stock and a stock that can make you rich. The Motley Fool's chief investment officer has selected his No. 1 stock for 2014, and it's one of those stocks that could make you rich. You can find out which stock it is in the special free report "The Motley Fool's Top Stock for 2014." Just click here to access the report and find out the name of this under-the-radar company.

David Eller has no position in any stocks mentioned. The Motley Fool recommends Apple. The Motley Fool owns shares of Apple. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

4 in 5 Americans Are Ignoring Buffett's Warning

Don't be one of them.

Jun 12, 2015 at 5:01PM

Admitting fear is difficult.

So you can imagine how shocked I was to find out Warren Buffett recently told a select number of investors about the cutting-edge technology that's keeping him awake at night.

This past May, The Motley Fool sent 8 of its best stock analysts to Omaha, Nebraska to attend the Berkshire Hathaway annual shareholder meeting. CEO Warren Buffett and Vice Chairman Charlie Munger fielded questions for nearly 6 hours.
The catch was: Attendees weren't allowed to record any of it. No audio. No video. 

Our team of analysts wrote down every single word Buffett and Munger uttered. Over 16,000 words. But only two words stood out to me as I read the detailed transcript of the event: "Real threat."

That's how Buffett responded when asked about this emerging market that is already expected to be worth more than $2 trillion in the U.S. alone. Google has already put some of its best engineers behind the technology powering this trend. 

The amazing thing is, while Buffett may be nervous, the rest of us can invest in this new industry BEFORE the old money realizes what hit them.

KPMG advises we're "on the cusp of revolutionary change" coming much "sooner than you think."

Even one legendary MIT professor had to recant his position that the technology was "beyond the capability of computer science." (He recently confessed to The Wall Street Journal that he's now a believer and amazed "how quickly this technology caught on.")

Yet according to one J.D. Power and Associates survey, only 1 in 5 Americans are even interested in this technology, much less ready to invest in it. Needless to say, you haven't missed your window of opportunity. 

Think about how many amazing technologies you've watched soar to new heights while you kick yourself thinking, "I knew about that technology before everyone was talking about it, but I just sat on my hands." 

Don't let that happen again. This time, it should be your family telling you, "I can't believe you knew about and invested in that technology so early on."

That's why I hope you take just a few minutes to access the exclusive research our team of analysts has put together on this industry and the one stock positioned to capitalize on this major shift.

Click here to learn about this incredible technology before Buffett stops being scared and starts buying!

David Hanson owns shares of Berkshire Hathaway and American Express. The Motley Fool recommends and owns shares of Berkshire Hathaway, Google, and Coca-Cola.We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

©1995-2014 The Motley Fool. All rights reserved. | Privacy/Legal Information