U.S. agency gives RIM another shot, tests new BlackBerry

TORONTO Fri Dec 14, 2012 4:52am IST

Research in Motion Chief Executive Officer Thorsten Heins holds up a prototype of the BlackBerry 10 smartphone at the BlackBerry World event in Orlando May 1, 2012. REUTERS/David Manning

Research in Motion Chief Executive Officer Thorsten Heins holds up a prototype of the BlackBerry 10 smartphone at the BlackBerry World event in Orlando May 1, 2012.

Credit: Reuters/David Manning

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TORONTO (Reuters) - A U.S. federal agency that has been phasing out the BlackBerry in favor of the iPhone said on Thursday it would test Research In Motion's RIM.TO new BB10 smartphones, fueling a fresh spurt in RIM's shares ahead of the new line's launch.

Immigration and Customs Enforcement (ICE), an investigative arm of the U.S. Department of Homeland Security, will begin a pilot program early next year to test the new line and the software to manage them on its network.

The news, which sent RIM shares up more than 6 percent on Thursday morning, extends a weeks-long rally that has pushed the stock to its highest close in more than seven months.

Investors have warmed to the stock - which had lost about 75 percent of its value in the last two years - on evidence that the make-or-break BB10 line is gaining traction with RIM's bread-and-butter customers in the weeks before its January 30 launch.

RIM RIMM.O, a one-time pioneer in the smartphone industry, has lost market share in recent years to Apple's (AAPL.O) iPhone and devices powered by Google's (GOOG.O) market-leading Android operating system. Even RIM's core business customers, who once used BlackBerry devices almost exclusively, have been defecting in droves.

BB10 represents Waterloo, Ontario-based RIM's best hope of persuading both corporations and government users to stick with its smartphones, long valued for their strong security features. RIM promises the new line, powered by the BlackBerry 10 operating system, will perform more smoothly and with more speed than previous BlackBerrys.

ICE is one of the customers it hopes to win over.

"Our priority is to ensure that ICE and all government agencies understand the full capabilities of the new BlackBerry 10 platform and how it can help them meet their mobility needs today and in the future," said Scott Totzke, RIM's senior vice president of BlackBerry Security.

ICE in October announced plans to end a long relationship with RIM, saying that its aging lineup of BlackBerry devices could "no longer meet the mobile technology needs of the agency." At the time, ICE said it would buy iPhones for about 17,600 employees.

A spokeswoman for the agency said on Thursday ICE is not backing away from either Apple or RIM.

"Given the nature of a rapidly evolving marketplace for mobile computing and the rising expectations of our users ... the pilot with RIM is a prudent technology management practice," said Barbara Gonzalez, the agency's press secretary.

Gonzalez said the agency is developing mobile applications for law enforcement and it is looking into how BlackBerry 10 may be able to provide mobility solutions in the future.

"ICE and RIM have had a long and good relationship, and we plan to continue that relationship," she said.

SECURITY ADVANTAGE

Last month, RIM said it had won a much-coveted U.S. government security clearance for its BlackBerry 10 devices and its new enterprise management platform.

The company said it was the first time a BlackBerry product had won Federal Information Processing Standard (FIPS) 140-2 certification ahead of launch.

The certification, from the National Institute of Standards and Technology, is one of the minimum criteria for products used by U.S. government agencies and other regulated industries that store, transfer, share and disseminate sensitive information.

The stamp of approval gives many of RIM's security-conscious enterprise clients confidence that data on smartphones running BlackBerry 10 can be properly secured and encrypted.

RIM, which has begun beta testing its mobile device management software BlackBerry Enterprise Service 10 with a handful of key enterprise customers, said ICE will be one of the first government organizations to pilot the BlackBerry 10 devices.

SHARES SURGE

RIM shares closed on Thursday 4.1 percent higher at $13.86, after rising as high as $14.16 on the Nasdaq. Its Toronto-listed shares ended the day 3.7 percent higher at C$13.63.

A day earlier RIM shares rallied after favorable comments by Eric Jackson, a long-time bear on RIM's stock. In a piece published on Thestreet.com, he wrote that he now has a long position in RIM, dropping his bets that the stock would drop.

Jackson said the positive sentiment building in RIM's stock is unlikely to dissipate any time soon. He said many of RIM's 80 million subscribers are likely to upgrade to the BB10 when the new devices are launched.

The stock has more than doubled in price since September 24, when RIM's shares were trading slightly above the $6 level.

(Editing by Dan Grebler, Muralikumar Anantharaman, Andrew Hay and Phil Berlowitz)

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