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BlackBerry stock soars on word of Pentagon order

Reports that the Department of Defense chose the device maker's phones caused the company's stock to soar. Meanwhile, it moves forward in selling the majority of its Canadian real estate holdings.

The BlackBerry Z30.
Sarah Tew/CNET

Like a cat, BlackBerry appears to have nine lives. Just as investors seemed to be writing off the struggling smartphone maker, it was reported by some media outlets that the company landed a massive US government contract and its share prices skyrocketed.

The US Department of Defense announced last week that over the coming year it would be bringing "new mobile capabilities to as many as 100,000 DOD users." The agency said that it "currently supports 1,800 unclassified mobile devices," including items like iPads, iPhones, Samsung 10.1 tablets, and Motorola Razr, and "also supports 80,000 BlackBerry phones." The 80,000 phones referred to already existing devices, but many of us in the media believed the number was related to new orders.

This news caused BlackBerry's share prices to soar. The US stock market closed on Tuesday with BlackBerry shares trading at $9.93 and after-hours trading up as high as $10.57 -- this is roughly a 35 percent increase from the end of 2013, when the company's shares were trading around $7.

With the advent of high-end feature-full smartphones from companies like Apple and Samsung, BlackBerry has noticeably struggled to keep up. Over the past couple of years, the company has been losing droves of customers and lots of money. Last quarter, sales of BlackBerry smartphones were off by about 50 percent and about 75 percent of those sales were for lower-end BlackBerry 7 units -- which didn't seem to bode well for the company's higher-end business that's using the newly launched BlackBerry 10 software.

Despite these woes, newly appointed BlackBerry CEO John Chen has remained optimistic and said that he plans to focus on enterprise security and messaging for 2014. When speaking to the press, Chen has often referenced BlackBerry's lucrative government contracts.

"Many in the regulated industries -- those with the most stringent security needs -- still depend solely on BlackBerry to secure their mobile infrastructure. For governments, BlackBerry cannot just be replaced -- we are the only MDM provider to obtain "Authority to Operate" on US Department of Defense (DoD) networks. This means the DoD is only allowed to use BlackBerry," Chen wrote in a memo on December 30. "Across the globe, seven out of seven of the G7 governments are also BlackBerry customers."

Last May, BlackBerry succeeded in getting its entire line of BlackBerry 10 devices to pass rigorous Department of Defense security requirements. This meant the Pentagon approved a government contract for 470,000 BlackBerry phones despite having opened up its exclusive BlackBerry contract to companies like Apple and Samsung the year before.

Over the years, various government agencies have signed contracts with BlackBerry because its devices have proved to meet the needs of high-level security thresholds.

BlackBerry also announced on Tuesday that it's planning to divest the majority of its Canadian real estate holdings. The phone maker said that through a combination of sale-leaseback and vacant asset sales, it will sell off more than 3 million square feet of its commercial real estate portfolio.

"BlackBerry remains committed to being headquartered in Waterloo and having a strong presence in Canada along with other global hubs," Chen said in a statement. "This initiative will further enhance BlackBerry's financial flexibility, and will provide additional resources to support our operations as our business continues to evolve."

Correction, January 23 at 12:07 p.m. PT: An earlier version of this story incorrectly reported that BlackBerry had landed a new contract with the Pentagon. The 80,000 phones mentioned in the US Department of Defense's press release referred to already existing devices.