Alphabet. We will have details. Wework went from one of the most anticipated ipos to a floundering Coworking Company just trying to survive. We will look at what it faces in the new year. But first, our top story. Bloomberg was the first to report the iphone maker has a secret team working on a satellite technology, striving to find new ways to beam data directly to its devices. This is all according to people familiar with the matter. The company has about a dozen engineers from the aerospace satellite, and antenna Design Industries working on the project with the goal of deploying their results within five years. For more, i want to bring in bloomberg technologys mark gurman. What do we know so far . It is topsecret. It is operating like a startup in apple. It has the right funding. It has the ear of tim cook. It has a bunch of Aerospace Engineers and executives working on a plan to let iphones and other apple devices receive their data directly from apple developed antenna towers, satellites, and equipment that interacts with satellites, bypassing or aiding some of the wireless carriers around the world. Taylor taylor what are they hoping to achieve with this . Mark this is part of apples goal under steve jobs and actually written by tim cook. If it was apples call, they would not have to deal with anyone. Entityd be the complete in terms of the supply chain and the companies they need to work with. They are working on new chips to replace intel on the iphone in terms of its modems, computer processors freddie macs. They have done also to new components. Satellite is another way of enable that to get the most important things in these devices and data. Taylor where are we in this long process . Mark we are very early. We are in about year two or initiative, this thinking inside apple, and i would say we have another three to five or even seven years to go. This is a very long time i. Very stealth, very early, very small, and exploratory team. Taylor you talk in your story about how apple really goes into initiatives they cannot see some profitability or a light at the end of the tunnel. How do they see that, and went . When . Way ofhey see it as a enabling stuff in. Imagine beaming data from satellite to the devices in your home and im not needing to rely on the carriers. The future is superlong. They are in no rush to do this permit if it takes 10 or 15 years to do, that is still good enough. Apple is not going away anytime soon. Taylor they often talk about trying to learn from previous failures that you highlighted in the story because this hardly guarantees success. What are some failures that came before them that they can learn from . Been atar link, that had big name working on this. Facebook butchered their effort. Google was trying internet balloons in some developing regions for years. Essentially that has gone nowhere. You have seen spacex and amazon doing more in the satellite space. They are talking about doing filings with Government Agencies on this but you do not see the light at the end of the tunnel here. Apple is not as far as them in their implementation is likely to be different. Taylor it is often about the men leading the project. What do we know about the men starting this all . Mark there are men and women involved. Taylor nice correction, mark. Mark they were Top Aerospace executives at google, and they are leading the project. They have a team. They hired a person named ashley williams, who was a big time executive at aerospace corporation, working on satellite and Wireless Technology and also to space endeavors. People from Satellite Companies called fsl, but another one which is part of the larger google ecosystem. A lot of people working on this. Bothr and correcting me, men and women behind the scenes making that project come to life. Mark gurman, thanks for joining us. Now to another story out of this world. But we might have a problem. Star lineres of spacecraft lifted off perfectly from Cape Canaveral today, but the engine burn did not go properly and now nasa says the council will not be able to meet up with the International Space station as planned. Unmanned,flight was but the Company Hopes to begin flying manned flights on the star liner next year. Justin bossman joins me now over the phone with more. Justin, what do we know so far about the star liner failing to reach the International Space station . Justin what we know, the early stage of this is that when it separated from a rocket in space, there was a timing system issue. Essentially, the spacecraft was operating on a clock that was not set the right time. It was doing some things out of sequence. It burned an engine to move to a place at the wrong time. Right now, what happened was that used a lot of fuel in that process and did not want to try to get to the space station. What is happening is nasa says they will land early sunday morning in new mexico and call that the end of this flight. Taylor you talked a lot about burning too much fuel too early. This is a technology show. Im curious about the Technology Behind that. How difficult or easy it is to correct that next time. Justin well, i think that is the central question right now because with that clock issue, which showed the mission elapsed time, boeing does not really know what caused that. They are going to be very keen to investigate, which has already started, but specially after the landing, to try to figure out why in all of the scenarios that were run before the launch that this particular outcome was not something fourseam. The nasa administrator emphasized today this is exactly why you have a test flight. Because they want to find things like this that were not expected. Taylor justin, we have been talking all day about boeing. They are a clear leader in this space, but there was also a company we talk about frequently, spacex. Where are both of them involved in this process . Justin indeed there is. Spacex is another of the two vendors for this nasa commercial crew program. Essentially, nasa has hired both companies to fly their astronauts to the space station. What happened earlier this year in march, spacex flew their crew capsule to the space station and dock for several days before returning. They are doing some additional testing. The inflight abort system so if there were a problem with the rocket, the crew capsule would be ejected safely. But with what happened today, one of the Big Questions will be, how much does that set the plans for manned flights next year into later in the year as opposed to earlier in the year . Taylor it sounds like spacexs technology could be a little bit ahead of boeings. Am i reading too much into that . Justin i think maybe a little bit, just because nasa has to sign off on everything before they are ready to fly personnel. I think that with the issue today on this elapsed timing clock issue, there is a similar system at spacex. So everybody wants to fully understand what happened with that technology and the system. Because nasa did emphasize if there was anything applicable to the spacex system, that will also be looked at. I think right now the question is just, what happened . What is the fixed . And then set the schedule from there on. A realistic is timeline for commercial space trouble travel . Justin that is a very good question. I think nasa would like to see 20 20 be the year where they rotate their personnel to and from the space station on two commercial companies, boeing and spacex. After that, boeing and spacex would both like to sign up additional clients who do not work for nasa, dont work for government, but have the means to fly, and just take them. Both of these spacecraft have additional seats that can be used, can be sold. Beyond that, Virgin Galactic said next year they will be taking their first customers into space. There have been similar plans by blue origin, which has a lot of funding from the creator of amazon. I think that in the next 12 to 18 months, you will see a Real Movement because these companies are at a point where they have done years of development, testing, engineering. And now it is the point where this is either going to work or not going to work, but they need to fly. Taylor i never thought i would live to see the day of potential commercial space travel, but thank you to bloombergs justin for breaking that all down. Coming up, tesla stopped records this week. We will discuss this turnaround in 2019 and whether ceo elon musks lofty goals can be met. Analyst insight, it is all next. If you like bloomberg news, you caplisten on the bloomberg or in the u. S. On sirius xm. This is bloomberg. The year withends shares reaching record, nearly touching the 420 million share price that ceo elon musk made a goal. It was the beginning of the year that tesla stocks slid due to the pretty concerns and the delay of the model wide crossover. Investor worries were alleviated , raising over 2 billion. We started to see some lofty goals with at least 360,000 deliveries. As of now, the target remains possible if the company can hit 100 deliveries in the fourth quarter. This year, tesla began selling in australia, taiwan, and china. Those investors are very focused on china as tesla will begin deliveries from its shanghai factory soon. Tesla said it will lower the model three price tag by 20 or more next year. What events are analysts zeroing in on . For that, craig irwin in new york. The book make a market in shares of tesla. You are sitting across the table from me so lets start with you. Another record high. 405 price target now on the shares. What do you make of the recent record highs . I think two things are going on. First recall that investors were surprised by the strong gross margin the company put up. Now it is becoming apparent that competing companies are not able offer. Tesla looks competitive going into 2020, more than we thought. Taylor crag, what do you make of the recent runup in shares . Craig we have been believers in the china market longterm, but i think people have really aggressive expectations for 2020 and beyond. The reality is people are missing that the character of the million e. V. Sales in china is different from the typical e. V. Sales in america. The model three is not a comp. The safety profile and overall range and expectations and cost is different. People are just getting getting around big numbers out of china without understanding the direct comp being for the vehicle. Taylor so both of you went straight to china. I want to show you a chart i am showing to our bloomberg audience inside the terminal, which is all of auto sales within china. Frankly, the picture has not been good on a yearoveryear basis. You are basically looking at declines in every month of the year. Does tesla have enough demand to offset what looks like a pretty big macro headwind, joe . Joe there will be a segment of the market they will be able to penetrate. You are seeing negative your on your comparisons on a very large number. China is the largest auto market in the world. It is the largest tv market in the world. They want to sell half a Million Units in china, unreasonable. Can they get to a couple tens of thousands per month . I think probably they can. Over the long term, they will need to successfully penetrate other markets. Taylor crag, as we take a look at china, do they have enough demand with the 20 price cut on the model threes to offset a big drop right now car sales in china . Craig that is the key point of our bearish thesis, that we will see some fairly substantial deceleration of growth in 2020 versus 2019. We are looking at unit growth falling to Something Like 27, 20 6 from 47 this year. That is a major drop off. When you see the u. S. Market down 40 yearoveryear in the Third Quarter for tesla, is china going to be big enough to backfill that volatility . Obviously there is other pieces with the model y. But frankly, we dont see it. Be bigt think there will growth on the 47 this year. We think it will be tepid. We think we will see continued deceleration in out years. Taylor you talk about other markets outside of china. In the introduction, we talked about australia, u. K. , eastern europe. Where do you need to see other areas pick up slack if you see drop off in say the u. S. And china . Joe to be honest, it will be europe and other developed markets, and none of them will be as developed as china, but it is important to keep this in context in two ways. Craig just pointed out fairly that growth is decelerating. Find me another auto company with 27 year on year growth. What is happening is enormous market share growth. I think they are going to need to be successful with the model y. They will need to put effort other segments. If this company can continue to grow in the double digits, probably the stock will continue to do well. Taylor crag, i want to switch over from geography to the composition mix when we look at what cars they are selling. In your note, you talk about how the model y could cannibalize the model 3. Is that ok given the y is more profitable . Craig frankly, the more profitable cars have been the model s, model x. At the beginning of this year, we saw some cannibalization take shape their. That is one of the reasons he was down in the Third Quarter. That has continued. The model 3 has continued to cannibalize with much larger portions. The model y may start with higher margins, but it will significantly pressure preexisting demand. We dont think it will be additive to the model three. We think it is a substitution play and does not expand the market much beyond what is already served by the model 3. Taylor joe, you are nodding. What do you make of the composition mix . Joe i agree with a lot of what craig is saying. For starters, the y will cannibalize the x significantly. It will be the margin hit. There will be cannibalization of the model 3 as well. However, it is important to not lose sight of the larger picture, which is coming into 2020, has audi gotten their act together . Porsche, mercedes, ford . No. It is a little surprising given how long we have known electric vehicles are important that no one really stocks up with tesla in this mid premium segment. Taylor crag, weigh in on that. Where is the competition . Craig joe and i agree on a bunch of things but one thing i disagree on significantly is the assessment of porsche and some other vehicles. Porsche drivers care about how the vehicle goes down the road. If you look at the success going around the takon, it questec. The model s cannot get around it. They had to strip the vehicle, at extra capacity, etc. , to try to get there, and they still failed and will try to come back and do it again. Porsche drivers care about the experience in the vehicle. Epa mileage numbers do not matter as much. Vehicle will be a large success for that company. There are potential buyers for tesla vehicles. They will be switching to porsche and other oems over the course of the next year. Taylor i wonder as we look at another chart im looking at in my terminal, what has been the big hesitation from the street to catch up to the share price . The median price target is only 293. Is it elon musk himself . What is it that makes people so nervous, so cautious, i should say, about this company . Is joe i dont think it must. Must has been blessed for a while. It is not anything new. The stock has moved quickly and is expensive. I got caught wrongfooted. You have analyst looking at it saying, do i really want to jump on board here one stocks spike like this . Particularly because people doing detailed work like crag and me know margins will likely be down in q1 as they load the china factory. People are unwilling to jump on the train here. Taylor craig, what is the biggest overhang for you on the stock as you look at the difference in the shares trading in the median target . Craig tesla is no longer a starter. Tesla is a maturing company. It is not an emerging growth. So why does it deserve to trade at 40 or 50 times earnings . It doesnt. This is a company where margins, overall shareholder returns matter. That is a transition that shortterm investors really skipped but they drive volatility in the stock. The big institutions are the ones that drive evaluations. I dont see major institutions loading up the truck on the stock here. You are much likely to see people buyers closer to the 250 target. Ours is 249. You can get there with the margin missed that joe is referencing that is likely to materialize in the fourth or first quarters. And the disappointment around china. The expectations around china are really lofty. Taylor both of you sound a bit more neutral than the other big bulls i have heard out there. I want to ask a final question to both of you. What needs to happen in 2020 for you to change your opinion on tesla and become a bit more bullish . Joe, i will start with you. Joe to be honest, im looking for an entry point. I have been positive and sang for a wild the Company Makes the best e. V. s in the market. They still do. Waiting for the more modest set of q1 expectations. Taylor craig, your thoughts . Craig i will look for expectations versus what i think is a fair outlook. I did upgrade the stock to buy around the 200 level this year. Part of my bullishness really was china. I thought people were far too bearish on the financing outlook and china. We really do see china being a real market, but you know if china ends up being 300,000 unit market, yes, i can turn positive absolutely. I dont see that in the realm of possibility right now. Taylor thank you, craig irwin and joe osha. Hear why the Trump Administration came to the defense of the tmobilesprint merger and why they think it will benefit consumers. That is next. This is bloomberg. Taylor the Justice Department and sec are supporting the tmobilesprint merger. Not beid it should blocked. They said the combination would benefit consumers, not harm them. Twitter removed almost 90,000 accounts linked to the Saudi Arabian government. Researchers identified as part of a Propaganda Campaign to spread their political interests. They were using their large volumes to aggressively like and retweet things related to western politics. Numerous possibilities with a new pay package. How much is the new alphabet to elearning . We will find out next. This is bloomberg. This is bloomberg technology. Im taylor riggs. Ceo is getting a hefty pay