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Samsung close to mobile-device deal with FBI: sources

A man holds up Samsung Electronics Co's latest Galaxy S4 phone during its launch at the Radio City Music Hall in New York March 14, 2013. RE
A man holds up Samsung Electronics Co's latest Galaxy S4 phone during its launch at the Radio City Music Hall in New York March 14, 2013. RE

By Euan Rocha and Sinead Carew

(Reuters) - Samsung Electronics Co Ltd is close to signing a deal to sell its popular line of Galaxy devices to the U.S. Federal Bureau of Investigation, sources familiar with the situation said on Friday.

The deal would be a boost for Samsung, which is increasingly seeking to cater to the needs of government agencies, a niche long dominated by Canadian smartphone maker BlackBerry Ltd.

The FBI, with more than 35,000 employees, at present uses mainly BlackBerry devices. It is unclear whether the agency plans to replace all BlackBerry equipment with Galaxy models or whether it will use hardware from both companies.

A spokeswoman for the FBI declined to comment on the matter, saying that the selection of its new smartphones is part of an active acquisition process and any current discussions are proprietary to the government.

The imminent deal was initially reported by the Wall Street Journal late on Thursday. The WSJ also said Samsung is close to signing a smaller order for its devices with the U.S. Navy, citing people familiar with the matter.

Representatives of BlackBerry and Samsung declined to comment. BlackBerry emphasized, however, that it regards its operating system as the best in the market in terms of security features.

"The security of mobile devices is more important now than it has ever been before," BlackBerry's chief legal officer, Steve Zipperstein, said in an interview. "It is fair to ask why in this context anyone would consider moving from the gold standard in security, which is the BlackBerry platform."

In May, the U.S. Pentagon cleared Samsung's Android mobile devices and a new line of BlackBerry devices powered by the BB10 operating system for use on Defense Department networks.

Samsung has been pushing hard to convince government agencies and corporate clients that its Galaxy devices, powered by Google Inc's Android operating system, can meet their stringent security needs.

The South Korean company hopes that the Pentagon clearance and the imminent deal with the FBI will help boost sales to security-conscious clients including banks and law firms.

SKEPTICS REMAIN

Some analysts remain skeptical about whether Android can meet all security requirements of such clients, and note that the FBI itself has highlighted some vulnerabilities of the platform.

"The Android operating system hasn't been secured properly," said Rob Enderle, principal analyst with Enderle Group, noting that Samsung has layered technology on top of the operating system in an attempt to make its Galaxy devices safer.

"If you are going to tackle security, you kind of have to do it throughout the entire platform. It's not that Samsung doesn't want to - it is that they don't own the operating system so they cannot," said Enderle. "If you're going to sell into government, you have to be able to provide a secure solution and Android isn't it yet."

Enderle and other analysts also say that since Android security is not end-to-end managed by a single entity, this can create more vulnerabilities and prove more costly.

The FBI's move to explore other platforms is also garnering some concern in political circles in the United States.

U.S. Representative Kenny Marchant of Texas said in a letter to the FBI that he believes the agency ought to use mobile devices that do not rely on disparate technologies that would create additional security vulnerabilities.

"I understand that the FBI may be considering a new solution that is a patchwork of technologies stitched together," Marchant said in the letter, which was obtained by Reuters. "I am concerned that this approach may prove to be more costly than other alternatives."

(Reporting by Euan Rocha in Toronto and Sinead Carew in New York; editing by Matthew Lewis)

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