BlackBerry Ltd. (TSX:BB)(Nasdaq:BBRY) CEO John Chen has made it very clear what the company’s focus is. He’s also made it very clear where BlackBerry’s strengths lie. So last week’s news should not be much of a surprise.

On Tuesday of last week, BlackBerry announced it would be acquiring data security company WatchDox Ltd. Terms were not disclosed, although there’s been speculation the deal could be worth as much as US$150 million.

So what exactly is Watchdox, and what does it offer? More importantly, what effect will this have on BlackBerry? Finally, how should you react as an investor? Below we take a look.

What is Watchdox?

Most of us are familiar with Dropbox. For those who aren’t, Dropbox allows users to store files in the cloud, making them accessible across different devices.

Dropbox is perfect for individuals, but large organizations are looking for an added layer of security. This is where Watchdox comes in. With Watchdox, enterprises can track and control who is sharing, or viewing, or even printing a file. A file’s creator can set a time limit on the file’s access, and can wipe the file from other devices, even after it’s left the network. If a hacker tries to steal the file, he’ll only see a bunch of encrypted characters.

For this reason, Watchdox is very popular with governments, and also with Hollywood studios, who don’t want to see their scripts leaked.

What does this mean for BlackBerry?

BlackBerry plans to provide Watchdox’s technology as a value-added service in its Enterprise Mobility Management (EMM) offering. More specifically, Watchdox will be offered alongside BES12.

This seems to be a match made in heaven. Both companies place a heavy emphasis on security, and have a very similar target market. So BES12 offering may gain more traction with potential customers.

That said, I have some concerns. First of all, Watchdox is not the only player in this game. Back in January, rival Box Inc. (NYSE:BOX) began selling shares to the public, and made it clear just how competitive this market is. According to the company’s prospectus, “The market for cloud-based Enterprise Content Collaboration Services is highly fragmented, rapidly evolving, and highly competitive, with relatively low barriers to entry for certain applications and services.” For this reason, BlackBerry’s new Watchdox offering is not exactly a game changer.

Secondly, we don’t even know how much BlackBerry paid for Watchdox. If you’re looking for hints, Box Inc. trades for nearly 10 times revenue, even though it’s not profitable. So the Watchdox acquisition probably wasn’t a bargain either.

How should you react?

Before this acquisition, we already knew BlackBerry was facing an uphill battle. Its EMM offering goes head-to-head with larger competitors, some of which sell their services at very low prices. Its one real advantage is security, but who knows how big a difference this makes, nor how how long it will last. After the acquisition, the story is still very similar.

So I would continue to be cautious on BlackBerry. True, it has some great assets, but it’s swimming in a shark tank, and its shares aren’t that cheap either. There are better options in Canada’s stock market.

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Fool contributor Benjamin Sinclair has no position in any stocks mentioned.