BlackBerry Ltd. Is Under Threat From This Little-Known Company

BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) may not be the leader in mobile security after all.

| More on:

BlackBerry Ltd. (TSX:BB)(NASDAQ:BBRY) will soon launch its first Android-powered handset, and is hoping the new phone will turn around the company’s sagging fortunes. In order to sell this device, which BlackBerry calls the Priv, the company is relying on its leadership in mobile security.

But when it comes to mobile security, BlackBerry isn’t the only game in town. There’s another firm in particular worth focusing on, one that you probably haven’t yet heard of.

The Blackphone

Silent Circle is a small, privately run company based out of Switzerland. It may not seem like much of a threat at first, but its founders are determined to take market share away from BlackBerry.

The company’s flagship phone, the Blackphone, is even more secure than the Priv. All calls and messages from the phone are end-to-end encrypted, meaning that no one else can snoop in. Better yet, all other apps are “locked down”, which prevents any data leaks. Impressively, Silent Circle got permission from Google to modify the Blackphone in this way.

The Blackphone is so effective that it has caused controversy. According to intelligence agencies, the Blackphone makes it easier for terrorists to avoid detection, making the world a more dangerous place.

But Silent Circle’s founders disagree. They claim that cyber-espionage is the real threat, and that the Blackphone offers much-needed protection.

How worried should shareholders be?

Most people still have never heard of Silent Circle, but the company has made some serious inroads. Over 80% of the top 50 companies in the Fortune 500 are clients. So is 90% of the U.S. Senate, as well as the FBI. Even the Dalai Lama uses a Blackphone.

So, BlackBerry shareholders should be very worried indeed. The company’s leadership position in security is never truly safe, and the Blackphone is just one example why.

If there’s any saving grace, it’s that BlackBerry’s future is more dependent on Enterprise Mobility Management (EMM) than on handsets. Yet one has to wonder what happens to BlackBerry’s bottom line if the Department of Defence switches to Blackphone.

And remember, BlackBerry’s track record of responding to competitive threats is not good.

Not the right time to buy BlackBerry

BlackBerry bulls claim that the handset business doesn’t really matter anymore. It’s a legitimate point to make, but BlackBerry faces intense competition in the EMM space as well.

At this point, I would hold off before buying BlackBerry stock. There are much better options for your portfolio.

This article represents the opinion of the writer, who may disagree with the “official” recommendation position of a Motley Fool premium service or advisor. We’re Motley! Questioning an investing thesis — even one of our own — helps us all think critically about investing and make decisions that help us become smarter, happier, and richer, so we sometimes publish articles that may not be in line with recommendations, rankings or other content.

Fool contributor Benjamin Sinclair has no position in any stocks mentioned. David Gardner owns shares of Alphabet (A shares) and Alphabet (C shares). Tom Gardner owns shares of Alphabet (A shares) and Alphabet (C shares). The Motley Fool owns shares of Alphabet (A shares) and Alphabet (C shares).

More on Tech Stocks