NEW YORK ( TheStreet) - Blackberry ( BBRY) shares are surging today after getting a big boost from Morgan Stanley ( MS). Blackberry was gaining 7.7% to $16.20 following this morning's "buy" recommendation from Morgan Stanley Managing Director of Technology, Ehud Gelblum. He is calling Blackberry a "niche mid range player" in today's smartphone marketplace, projecting target price for the company from $10 to $22 per share. But, it's not all great news for Blackberry. They're also dealing with what could turn into a problem for them in the long run. It seems that their new BB 10 operating system reportedly may have failed at its first attempt to pass new, stringent security clearance in the United Kingdom. Tens of thousands of British government workers currently use secure Blackberry devices and services part of their work. Any change would be a huge blow to Blackberry's current comeback efforts in their quest to re-invent itself in the wake of Apple ( AAPL) and Google ( GOOG) Android's recent smartphone successes. Blackberry has confirmed reports that its new Z10 smartphone hasn't passed the first round of testing by the UK's CESG (Communications Electronics Security Group). They rate and rank devices by just how secure they are for government use. And so far, in this case - not enough. The problem appears to be with the new OS 10's dual interface called "Balance". It's software which allows users to access separate business and personal profiles on the same device. The Canadian phone manufacturer responded to the news by announcing that reports of their new software being rejected are "both false and misleading". They say their new operating system didn't pass the first round of tests because the British government recently changed the rules Blackberry needs this type of clearance to stay ahead of the smartphone competition when it comes to secure wireless platforms that governments can trust. That's the feature that helped the former Research In Motion build such a strong international following - the core of their past success. Without British regulatory approval, Blackberry could face regulatory setbacks when dealing with other governments.
The last version of Blackberry's OS, 7.1, passed through testing, last December, with flying colors. They vow that they're working with the proper government officials to make the necessary changes and obtain the proper security approvals. Blackberry's new OS 10 platform has already received both U.S. (FIPS certification) and German security clearances. The Q10, an upcoming Blackberry with a physical QWERTY keyboard, is expected to be released for worldwide sales in the next few weeks. --Written by Gary Krakow in New York. >To submit a news tip, send an email to: email@example.com.