Happy friday. Welcome to squawk alley. Kayla, myself at post nine. John is off today. Also joining us, cara swisher at re code. Good morning, kara. The ceo of blackberry, john chen will join us. First, a bit of a friday selloff to accompany the thursday selloff. The worst two days for the dow since the beginning of september. Bob pasani is on the floor. Bob. This is a slightly different feel to it than this week. Remember, we have been slaves to the oil market. Its been oil thats been a mover of the stock market this week. This is a little bit different today. Take a look at the s p 500. We started on the weak side, and basically just drifted lower all throughout the day. Remember this is an expiration date. The volume is heavier than normal. In fact, that is not bringing down the market. Whats interesting here is financials are weak. Remember something. If the expectations are for lower rate less number of rate hikes, less chance for yield curves staep steepening. Financials might have a tougher time. They have run up a little bit ahead of the fed meeting. As you can see, regions, goldman, and citi are all to the down side. The most beaten up energy names today, theyre not selling off. Your chesapeakes and your range resources, your hess and apaches and southwest energy, look, theyre all up today. Its an interesting quasirotation going on. I want to show you consumer staples. This is a group thats generally been a winner for the year. You can see theyre down more than the market. Your big names. Your color objections and colgate. What it looks like to me is a little bit of yearend rotation going on. You sell some of the winners in consumer staples, and you buy some of the big losers that are out there in energy. You sell financials because the rate increase and expectations are a little bit lower here. Now, again, weve got an expiration today. Weve gotten Oil Expiration on monday. All of that is playing in. Its very difficult to untangle those particular threads. It does look like a little bit of rotation going on today. Finally oshgts volatility, were up a little bit, but remember, the vix has been moving down really all week. You see 26, 27 on monday and tuesday. The market stabilized middle of the week, that started moving down. Up about 3 today. Carl, back to you. All right, bob. Dont go too far. Bob pasani joining us on the floor. Kara swisher, lets kick it off with disney. The force has now awakened. Fans braving long lines to see the latest installment of star wars. The movie could rake in 180 million to 220 million in the u. S. And canada, but btigs rich greenfield just downgraded disney to a sell. Shares down about 3 . He joined us a few moments ago. Its squarely because of espn and the Cable Network division. Everyone is excited about star wars. Look, we believe star wars will do 2. 6 billion in global box office. Were not taking a negative view to star wars. This is all about Cable Networks thats 45 of disneys operating income. I would like to look at your broader take on the call. Its essentially saying going direct to consumer is a lot less sticky than subscribing to a Cable Service and its going to be easy to stick around for the football season and then leave. Yeah. I think he is right. I think thats the big problem that either faces at disney is the issues around espn. Its been such a juggernaut for us in terms of profits and the stock, and now, you know, youre seeing a lot of weakness there. He addressed it himself on the stage when i was interviewing him at the vanity fair conference. Theyre fully aware of the changes going on. Star wars is terrific, but there are lots of parts of this business, and unfortunately, espn is an important part. Do you think, kara, that 2016 is the year where that all comes to bare, a year where disney is benefitting from the tale of star wars which for each 100 million it gets at the box office, its expected to lend about 2 Cents Per Share to its earnings next year. Yeah. No, star wars is critically important. Theres theres more coming, and theyre opening the shanghai park is opening up next year. They have a lot of exciting thin things. Its really a tough business in the cable business. Richs point on going over the top. He says netflix is able to flood the zone with new content all year long. He says thats harder to do in something as niche as sports. Is that true . I dont know. I would say never until somebody has done it. Nobody thought netflix would be this successful, and not just netflix but amazon. I spent hours the other night watching the new season of transparent on amazon. I really love it. I spent all my time there. I was not watching abc, and i did sometimes watch abc. So its just a question of, you know, again, the secular changes in how people behave, and so theyve got to be very creative in how to figure out how to reach audiences and also take their sports content and do the same. Rick seems to say, too, in the company paying for individual sports rights, they not only overpaid, but they acquired simply too many. What is block anding tackling against your competitors and at what point do you think they went too far if, in fact, that is the case . Well, i think everybody overpays for these sports rights. The league has been benefitting enormously from the interest in this. How can they monotize it. Its just theyve got to start trying these kind of things in order to see what consumers are buying in the over the top market around sports. Obviously, sports it an area that is not going away. If they do really well eventually everyone will say they didnt overpay. Right now i just think its a more difficult environment to try to eek profits out of. Yeah. Well watch disney closely through the session. In the meantime, theres news on apple pay. As you know, heading to china early next year. The company pashing with union pay and 15 chinese banks to compete with alibabas alipay. They say theyre creating their own mobile wallet as walmart has done something similar. Its getting hard sxir harder to catch up with all of this. Yeah. No, a lot of them. Also, samsung pay is also trying to get in there very soon too. I think theyre all trying to get in by february or a time frame with the big buying around chinese new years, but, you know, this is an important market for apple to move apple pay into. Its got to move all its prkts products into, and its been very successful, and alipay sort of runs the show there along with we chat. It wants to be part of this market where people are buying, and i think its a must win for apple. Or at least a must get into the market in a very deep way. Theyve done very well there so far, and this is just another piece. An important piece. A lot of chinese consumers do use their mobile phones to buy things. Much more so than here. One of the reasons, kara, that alipay started p was not only did they have a way to transact online, but they also didnt have an attractive vehicle to store their deposits, to invest their money, and ann financial has been able to give them higher Interest Rates than any of the chinese stateowned banks. I wonder if you think apples partnerships are enough to stand up against what alipay and what and financial has been able to build as a full pay financial system. Well, people have behavior, and behaviors change. If they dont do it, what would you say if they didnt get in there with apple pay . They have to make a serious attempt to you know, the chinese consumers are very willing to use these systems, and for various reasons, including utility. The question is who is going to be the dominant player . They dont have to be the number one player, but they certainly have to be a significant player. Especially with their phones. It helps sell the phone. Its all part of the same package. Its why samsung has to be in here and why theres going to be a lot of competitors in this payment area, including, i guess, target and walmart which have not done as well as the others. You know, its a formidable rival, but they cant not be in china with apple pay. Its a must have. What do you make of the target . Is that about loyalty or Something Else . You know, again, everybody wants to control the payment. Theres a lot of information that goes with that and Shopping Behavior and the ability to control payments. Its very important. I mean, these phones are now in a way i just bought a hover board for my kid on the phone, and i didnt go near anything else. I didnt go near a store. Its just the way people are behaving, and you have to control the payment, and its part of the retail process now. Payment on the phone is critical. Absolutely. By the way, tim cook on 60 minutes with charlie rose on sunday. It will be interesting to see that. Finally, kara, theres a couple of other reports on yahoo today. Have you donnie work on that . Uhhuh. Yes. Actually, i was just finishing up the story. You know, its all around the proxy fight, which is coming next. Everyone sort of given Marissa Mayer a couple of weeks off for the holiday. She just had children, twins. I think what is looming by the beginning of the your sometime in january are these proximate where i fights. I dont know how yahoo can avoid them at this point. The people who are interested in waging these things are very determined. They thought it was half measures what happened just a few i guess a week ago with shopping the spinoff, but then deciding not to sell the core. I think they want to push very hard for a sale, and, you know, some of the reports say that theres all these circling. They were slowed down by the way yahoo announces. Saying were not sfor sale. Were happy to entertain offers, but were not going to be proactive about it. Definitely closed down buyers by verizon and others. Theyre going to push for a sale, and its a pretty tough road that they have in 2016. I think thats true. Is there any acceleration in the performance of the core business that could help them make their case . No. No. I think its going to be a very tough order. I dont know i mean, thats going to all drop at once. Theres going to be a terrible quarter in january announced, and theres going to be a proxy fight. Theres a lot more people leaving. Very significant executives leaving. You know, its just going to continue the drumbeat of what should be done. Who can turn around this business and whether it should be turned around by Marissa Mayer or not. Theres going to be absolutely i would be surprised if there wasnt a proxy fight, and they have a very good chance of winning or at least grabbing some seats. If they had given starboard a seat maybe earlier this year, that might have been enough to assuage them, but i dont think they are now. You look so cozy in that sweater and scarf. Im not going to see you for weeks, and im going skiing, and i want you to remember me like this. Enjoy, kara. See you later on. Thank you. Im trying to drive mary duffy crazy too. She will love the on air shoutout. Our wardrobe chief. Shes screaming right now silently inside her head. You know . Kara swisher out west. Thank you. Blackberry shares up 11 after the Company Reported earnings. John chen will join us after the break. And the force was with disney last night. Thousands stayed up late to watch the latest installment of star wars. Well get the latest numbers from disneys back with regard and the impact on some theater stocks. Also coming up, the swatch group entering the smartphone business. As we go to break, take a look at the dow. Again, the worst two days in a row since the beginning of september. Were back in a moment. Being a keen observer of the world has gotten you far, but what if you could see more of what you wanted to know . With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. Call our specialists today to get up and running. Welcome back on squawk alley. Im meg terrell. We have breaking news for you about Martin Shkreli. He was arrested at his home in manhattan yesterday on charges of fraud. Dow jones is reporting that turing pharmaceutical the good news i have been hearing this morning as well, we have heard he is under tremendous pressure from his investors to resign. Dow jones citing sources that they are close to replacing Martin Shkreli as ceo of turing. More news when we get it. Back to you. Thanks so much, meg terrell, following a story that is developing very quickly. Blackberry is reporting Third Quarter earnings and higher revenue than expected too. Will the Companies Move away from hardware to focus on software and services . How much will that be the key to securing the future . John chen, the ceo of blackberry, and he joins us now. John, its always great to talk to you after earnings. Thanks so much for joining us. Thank you. Thank you for having me. The street likes what it saw this quarter. Certainly a dramatic departure from the surprise in the previous water. 162 million in software revenue, and the majority of that is recurring revenue. Can you keep up this trend . Well, one quarter at a time. Yes, i think that the direction of our Software Business are pretty good. 71 today is recurring. Our goal for next year will be over 80 . By the way, i like to correct something earlier where you said that were moving away from the hardware business. We just launch a brand new android secure android phone, and its been doing pretty well. Were not really moving away from it, but we really want to build up our Software Business. I know that you have made some comments about shifting the focus of the company to primarily software, although you did launch it earlier this month. We did, john, see the number of devices that the software is operating on, it fell in the quarter, but you did see the average selling price rise. What is the hardware strategy right now, and how are you going to use that to make a profit next year . Thats a great question. You know, when i came in a couple of years ago, were losing money on our devices, and the volume was quite high then. We need to really get, you know, our device business to be profitable, and thats what i have been working on. Once we have a good strategy on the product, which we believe we do now, were going to focus a lot on privacy and security. Then were going to move into a lot more distribution channel, get the volume back, and then were going to start making money. Were in that transition from the hardware. You know, we make progress, and well continue to make progress, and soon were going to be breaking even and making money there. Youre right. On the software side, i think the software the assets of blackberry in software is huge. We have about 44,000 patents that are very active, very relevant, and so were going to take advantage of that, and generally more momentum there. Software is going to be a big business for us. John, you have written in the past that blackberry is non for their commitment to privacy, but you said our privacy commitment does not extend to criminals. How does the recent debate over encryption how do you see it buffering the Business Model over time . Thats a good question. Thank you for pointing that out. Now you make a statement, you know, it gets a little carried away in that statement. It is a true statement. I think beyond business all of us have a responsibility to make our world better, to be more peaceful, and to be more safe. You know, we have a strategy called illegal assets. If a country serve us a subpoena that needed track certain activities, then we will do so, but i have to make a point. We dont ever share content because we dont keep the content. We only share the data surrounding the content, meaning like the locations and, you know, who is talking to whom and but, again, this needs to come from the highest level of government. We need to have a court order, a subpoena for it, and then well start responding then. To me its just, you know you know, just being a responsible citizen, i guess, thats what im thinking about. Every day, you know, good people. You have nothing to fear about your privacy with us. What should we expect, john, to see from blackberry next year. You said recently as recently as this morning that you guys are going to launch software for selfdriving cars next year. There have been talks about you guys moving more into the android system, and if you dont make a profit potentially getting out of hardware. How will all of that play out over the next year . Okay. My statement this morning regarding demonstrating the iot and car software, Auto Software are related to some of the announcements that will come up at the ces, which is about a couple of weeks from today. Were preparing to launch that. We already launched partners who like to use our software in the auto driven car. We will be a provider of Technology Component to those efforts. It has been early on. We acknowledged november 6th its been well received, and we talked about software lsh already. John chen, pretty great quarter. Hopefully well get to talk to you as well. The dow down 205. S p down almost 18. Bowing and disney and goldman among the worst dow components. Across the atlantic, theyre about to wrap you their market week. Well get to you in just under seven minutes. Dont go away. As the selloff continues here in the u. S. , looks much the same across the pond. Simon hobbs is here to walk us through. European equities, of course. The down draft from yesterday in addition to the selling today. Theyre actually disproportionately worse than what you have in this country. Telecom companies notably actually, many of the miners from the commodity stocks are bounced today. Just bear in mind whether to leave this now for the month of december, which, of course, as you come to the end of the year, becomes defining to the year abroad. Massive underperformance from european equities. Ecb disappointment. Fed, as can you see. Down 6 for december. Although for the yeartodate, european stocks are still positive. Its this market, of course, that on this move here has now turned negative. In brussels the e. U. Leaders summit u. K. Prime minister David Cameron has failed in his attempt to get microns ban from claiming u. K. Benefits for four years. The rest say that would be discriminatory. He still says its a way to the deal that might allow the temporary suspension of benefits anywhere in the union. If Public Services are overwhelmed. This is an attempt to stock the u. K. Populous from believing the