Dial Tones

Amid Spy Scandal, Blackberry Buys Maker of Software Protecting Chancellor's Phone

German Chancellor Angela Merkel dials her cellphone on June 27, 2014, during an E.U. summit in Brussels. Source AP
German Chancellor Angela Merkel dials her cellphone on June 27, 2014, during an E.U. summit in Brussels. Source AP
  • Why it matters

    Why it matters

    The sale of Secusmart, a German software maker whose products protect the cellphone communications of the German chancellor, could be blocked out of security concerns.

  • Facts

    Facts

    • Blackberry, the Canadian handset maker, has offered to buy Secusmart, a German company whose security software is used by the German government.
    • Secusmart makes the security software that protects the cellphone of the German chancellor, Angela Merkel.
    • One German politician said the government will examine whether the sale should be blocked under German law out of national security concerns.
  • Audio

    Audio

  • Pdf

Canadian mobile phone company Blackberry has agreed to buy Dusseldorf-based technology company Secusmart, which provides anti-eavesdropping technology used by the German chancellor, Angela Merkel.

Secusmart said the deal is still subject to regulatory approval and did not release any financial details.

The German interior ministry appeared surprised by the sale and a ministry representative said the government is looking at whether the sale comes under the Foreign Trade Law, which may give Germany the opportunity to challenge the transaction on security grounds.

Under the law, the German government can investigate, and possibly block, a deal if a person or company outside the European Union buys a Germany-based company.

The acquisition, if it goes through, would give Secusmart access to the global market.

The company sought to reassure clients in a statement, saying that it will continue to protect the security of its existing and new customers and will continue to use “end to end encryption” technology that means only the sender and intended recipient of a message can read it, to protect against third-party espionage.

“Both governments and enterprises are now more and more focused on security in the mobile world.”

John Chen, Blackberry Chief Executive

In end-to-end encryption, data travelling between two destinations is protected and intermediaries such as Internet providers cannot read or tamper with it.

In its statement, Secusmart added: “As in the past, no Secusmart employees will have access to the encryption algorithm or the secrets of our clients.”

But doubts still remain whether Secusmart will retain the German government contract and still be permitted to handle government data should the sale go through.

The issue of security and technology is politically sensitive in Germany, after revelations that the U.S. National Security Agency had for years tapped communications in Germany, including the mobile phone of Ms. Merkel. The German chancellor uses a Blackberry equipped with Secusmart anti-eavesdropping technology.

Most German government departments also use the same technology and the government has ordered several thousand officials to use protected phones.

The Canadian media reported that Canadian politicians and government officials also use the same technology.

In June, the German government cancelled a contract with Verizon amid fears that U.S. firms may be handing over data to U.S. authorities. Verizon had provided Internet services to several German government departments. Tobias Plate, a German interior ministry spokesman, said at the time that the revelations of how the NSA gathers information from American firms “show that the German government needs a very high level of security for its critical networks.”

 

Secusmart CEO Hans-Christoph Quelle speaks on July 29, 2014, at a Blackberry Security Summit in New York. Source Reuters
Secusmart CEO Hans-Christoph Quelle speaks on July 29, 2014, at a Blackberry Security Summit in New York. Source: Reuters

 

Lars Klingbeil, a member of Germany’s Social Democrat party, the junior partner in Ms. Merkel’s ruling political coalition,  described Blackberry’s purchase of Secusmart as “sensitive” and said the German government would look closely at the deal.

An interior ministry spokesman said he did not expect the deal to undermine the security benefits of Secusmart’s technology used by government workers.

Following its acquisition, Secusmart will remain an independent company owned by Blackberry and based in Germany, the company said.

Blackberry, struggling for survival as rivals nab its core business users, hopes the acquisition of Secusmart will make it a leader in the secure mobile phone market.

The Canadian cellphone maker used to dominate the business phone market for emailing executives.

But the company failed however to keep up with advances in touch-screen technology, and the application revolution, and has lost ground to Apple and Samsung.

Two years into a restructuring marked by significant cost cutting, Blackberry Chief Executive John Chen wants to appeal to security-conscious mobile users to reinvent the company as a specialist in secure, tamper-proof communication devices.

“Everybody wants to talk about eavesdropping, but it really isn’t just that. Both governments and enterprises are now more and more focused on security in the mobile world,” Mr.Chen said in an interview.

Analysts said the planned acquisition of Secusmart was a solid move that will boost profitability and allow it to concentrate on acquiring business clients instead of trying to compete in the fast-growing general consumer market.

This article was translated by Meera Selva. To contact the author: braune@handelsblatt.com

We hope you enjoyed this article

Make sure to sign up for our free newsletters too!