Technology. Coming up in the next hour, secret project. Have a team to working on Satellite Technology to be an Internet Services to devices. It will allow it to bypass Wireless Networks. Latest. Plus a pay raise. The reins, akes receiving a 242 million exception package. Details. Ve and big tech in 2019. Of the ent from one most anticipated ipos to a floundering company just survive. O we look at what it faces in the new year. But first to our top story, loomberg was the first to report that the iphone maker has a secret team working on a Satellite Technology. To find new ways to bring data directly to its devices. According to people familiar with the matter. He company has got a dozen engineers from the aerospace antenna Design Industries working on the project with the hope of deploying their results years. Five for more i want to bring in bloomberg technologies. What do we know about the so far . We know its top secret. Its operating like a startup inside apple. Has the ear of tim cook. It has the right funding. Bunchou said it has a of exaerospace engineers and executives all working plan to be able to let phones receive their data from antenna towers and satellite, in a way aiding some of the Wireless Network carriers that we have today around the world. What are they hoping to achieve with this . This is part of apples goal under steve jobs and been accelerated by tim cook, to own everything. If it was apples call they with t have to deal anyone. They would just be their complete own entity in terms in heir supply chain terms of the companies they need to work w. For example, hey are working on new chips to replace intel in both the iphone, in terms of processors uter for the macs, they have done all sort of new components devices. Satellites is another way to enable it, and thats data. Ctivity to where are we in this long process . Were very early. Or e in about year two three of this initiative, this thinking inside apple nd i would say we have another three to five to even seven years to go. This is a very long time line. Very s very stealth, early, very small, were tory team so aways away on this one. You talk in your story apple rarely goes into initiatives that they cant see profitability or light at the end of the tunnel. Do they see that and when . Yeah, i mean, i think they see the light at the tunnel as a way of enabling to do more stuff inhouse. Imagine being able to beam ata from a satellite to your apple watch, your phone, your ipad or mac evices in your home and then not needing to rely entirely on the carriers. Super long, right . They are in no rush. To t takes 1015 years do thats still good enough. Apple isnt going away any time soon. Talk about trying to learn from some previous failures that you highlight in your story ecause this hardly guarantees success. What are some of the failures that came before, hat they can try to learn from . Youve seen all sorts of starling, facebook butcher their effort. Was trying internet balloons in developing regions for years. Thats gone no where. And e seen spacex amazon doing more in the satellite space. They are talking about doing filings with government on this but you really dont see the light at the end of the tunnel and as far as t as theirs. Their implementation is much different. And while its about the project, ultimately its about the men leading it. There are men and women involved in the project. Correction. And john, they were Top Aerospace executives at google, and they are leading project. They have a team. They hired a person named williams, a big time executive at Aerospace Corporation working on satellites and wireless of nology and all sorts space endeavors so shes part of that, too. They have people from Satellite Companies called ssl, terra bella, which is part of the larger google a system so there are lot of people working on this, some of the biggest brains in aerospace. Me, both recting men and women behind the scenes making that project come to light. Technologies, thanks for joining us. Now to another story out of world, boeing may have a problem the companys star liner up ecraft lifted perfectly from Cape Canaveral today but an engine burn did not go nasa says d now the capsule wont be able to meet up with the International Space station planned. This test flight was unmanned but the company to begin flying manned flights on the star liner next year. A guest over the phone with more. What do we know so far about the star liner failing to the International Space station . We know, the early stages of this probe, when it separated from a space there was a timing system issue, so essentially, the spacecraft a clock ting on that was not set at the right time. So it was doing some things sequence. It burned an engine to move to a place at the wrong time. So right now, what happened was that they used a lot of fuel in that process and did to try to get to the space station. Happening, nasa says they will land early new mexicoing in and call that the end of this flight. Justin, you talked a lot too much fuel too early. This is a technology show. About the Technology Behind that. Ow difficult or easy it is to correct that next time . Well, i think thats the question right now because with that clock issue, which showed the ission elapse time, boeing doesnt really know what caused that. And so they are going to be investigate, you know, which has already started, but especially after the landing, to try to why, in all the scenarios that were run before the launch, that this outcome was not something that was foreseen. Nd the administrator did emphasize today this is exactly why you have a test flight because they want to ind things like this, that were unexpected. Justin, weve been about all day boeing. The clear leader in space but there is also a company talk about frequently, spacef. Where are both of them process . In this indeed there is. Spacex is another of the two for this Nasa Commercial Crew Program and essentially nasa has hired fly their ies to astronauts to the space station. Earlier this year in march, spacex flew their crew dragon capsule to space station and docked for several days before returning, and they are some additional testing next month on the nflight abort system so that if there were a problem with the rocket the your capsule would be ejected safely. But with what happened today, one of the big uestions will be how much did that set the plan for manned flights next year nto later in the year as opposed to earlier in the year . It sounds like spacexs technology could be a little boeings. Of am i reading too much into that . Maybe a little bit sign offasa has to on everything before they are ready to fly personnel. With the issue today on this elapsed timing issue, there is a similar system at spacex so everybody wants to fully happened what with that technology and those systems because, you now, nasa did emphasize if there is any applicable to the spacex system, that will also be looked at. So i think right now the question is just what happened what is the fix, you know, set the schedule from there on. A realistic timeline for commercial travel . Well, thats a very good question. I think nasa would like to 20 to be the year where they rotate their personnel from the space station on two commercial companies, boeing and spacex also after that boeing and spacex would like like to sign up additional lients who dont work for nasa, dont work for a government, but have the means to fly and just take hem because both of those spacecraft have additional seats that can be used, can sold. Beyond that, Virgin Galactic says next year they will their first customers into space. There have been similar which y blue origin has a lot of funding from the creator of amazon. Next hink that in the 12 to 18 months youre going too see a Real Movement because these companies are where they have done years of development, testing, engineering, and now its the point where either going to work or its not going to work, but they need to fly. I never thought i would live to see the day a potential commercial space to el, but thank you bloombergs Justin Bachman down. Eaking that all coming up, tesla reaching records. Well discuss its turnaround in 2019 and whether elon musks lofty goals can be met. Next. And if you like Bloomberg News check us out on the radio. You can listen to the app, bloomberg. Com and in the u. S. On serius xm. This is bloomberg. Tesla ends the year with shares reaching records, that 420 hing share price that elon musk made a goal. The beginning of the year that tesla stocks slid due to liquidity of the and a delay model wide crossover. Investor worries were lleviated with offerings raising over 2 billion. We then started to see some goals as musk said the year weaned with at least deliveries. As of now that target remains possible if the ompany can hit 105,000 deliveries in the fourth quarter. This year tesla began selling in australia, taiwan, uk, parts of Eastern Europe and china. Of those investors are very on china as tesla will begin deliveries from soon. Hanghai factory tesla said it may also lower by model three price tag 20 or more next year so what events are our analyses zeroing in on . Lets ask craig in new york san ere with me in francisco, joe, both roth and p securities have market in shares of tesla. With you. Rt another record high. 405 price target now on the shares. Of the you make recent record highs . I think two things are going on. Recall that investors were surprised by the margins they put up. Now it becoming apparent that competing Companies Really arent able to offer the products that we thought they were going to. So not only is china happening as you pointed out very strong ks competitively going into 2020, more so than we thought. Of this o you make recent runup in the shares . Weve been big believers in the china market long term but i think people have really aggressive for 2020 and beyond. He reality is, people are missing the character of the million sales in china. The very different than typical sales in north model is not a comp, the safety profile overall range and expectations and costs to those vehicles is very different, and people are giddy around, you know, big numbers out of china without understanding the direct comp ends up being for the vehicle. Both of you went straight to china. A chart to our bloomberg audience, all of auto sales within china. The picture has not been good on a yearoveryear basis youre everyg at declines in month of the last year. Does tesla have enough to offset there what looks like a pretty big mac crow headwind, joe . There will be a segment of the market they will able to penetrate. Youre seeing negative yearoveryear comparisons. A very large number. China is the largest auto world, largest ev market in the world. So i think if you were to about them trying to sale half a Million Units in china it would be unreasonable. Get to a couple of tens of thousands per month i think probably they can. The long term they will need to successfully penetrate other markets, though. Craig, as we take a look at china, do they have enough demand, with the 20 on those model threes to offset a big drop right now in car sales over in china . You know, thats the key point of our thesis is were fairly see some substantial deceleration of the growth in 2020 versus 2019. Were looking at unit growth falling to Something Like this 6 , from 47 year. Thats a major dropoff. When you see the u. S. You know, down 40 yearoveryear in the Third Quarter for tesla, you know, be big going to enough to back fill that volatility . Bviously there are other pieces with the model y. But frankly, we dont see it. There is hink going to be big growth on the 47 this year. Be hink its going to item bid tepid and continuing growth in outyears. You talked about other markets in china. We talked about australia, europe. Ern where do you see other areas that need to pick up the slack . Its going est be europe and other developed markets and none of them is going to be as i think ina but its important to keep this in context, in two ways. Irst, remember, craig just pointed out, i think fairly that year over year growth deceleratindecelerating. Is s happening here enormous market share growth. I think that they are going to need to be successful y. H the model they will need to penetrate other segments, but if this can continue to grow in the double digits, you know, probably they will stock will continue to do well. Craig, i want to switch over from geography into the mix. Osition at what cars they are selling. You talk about how the model could the more profitable cars x. E been model at the beginning of the year, we saw some start to ation to take shape. Thats one reason why revenue is down yearoveryear in the Third Quarter. Continued. Continue three has cannibalize there. Higher tart with margins but it will significantly pressure preexisting demand. Frankly, we dont think its ada active to the model 3. We think its a substitution play an doesnt really much the market beyond whats already served by the model 3. Joe can, youre nodding. What do you make of the composition mix within the sxy3. I agree with a lot of what craig is staying. Y will ters, cannibalize significantly and there will be margin hit although the higher volume and i think there will be some cannibalization of well. Odel 3 as its important not to lose sight of the laernl picture. Coming picture. Its a little surprising given how long weve known that electric vehicles are that no one has really stacked up with tesla premium ort of mid segment. Weigh in on that. Where is the competition . On a bunch of things but one thing write disagree quite significantly the assessment of porsche and some other vehicles. Porsche drivers care about actually hicle goes down the road. If you look at stuck ses the ound the tacon crushed it. The model s couldnt get around that. They had to jig the thing to strip the vehicle, add extra to even, et cetera, try and get there and still failed and they are going to and try and do it again. Drivers care about that experience in the age cle and epa mile numbers dont matter as much. Think there are a number of potential buyers for tesla vehicles. Hey will be switching over to porsche and other oems over the considers of the next year. Look at another chart inside my terminal, whats been the big from the streets to catch up to the share price . The median price target is 293. Is it elon musk himself . What is it that makes people so nervous or cautious, i should say, about this company . Musk. Ont think its look, hes been musk for a while, right . I dont think its anything new. Fact that this stock has moved very quickly. It is expensive, i, for wrong , got caught footed as we know, so you analysts looking at it really want to jump onboard . As they load the china factory, and so i think people are a little to jump on the train here. Craig, whats biggest overhang for you on this at k as you take a look the difference between where the shares are traying and that median price target . I look now, the way at things, tesla is no longer a startup. Tesla is a maturing company. Why does it deserve to trade at 40 or 50 times earnings . It doesnt. This is a company where profits, and, you know, overall shareholder returns really matter. Transition that, you know, some short term investors really skip, know, they drive the volatility in the stock. The biggest institutions are drive the at valuation. I dont see any major institutions loading up the truck on the stock up here. I think youre much more likely to see people be uyers back closer to their 250 level which is our price target. 249. T could very easily get there with a margin missed that joe is referencing that agree is likely to materialize either in the fourth or First Quarter and disappointment around china expectations around china are really lofty. Both of you sound a neutral thanre some of the other big bolds there. Have heard out what needs too happen in 2020 for you to change your pinion on tesla and become more bullish. Joe, ill start with you . To be honest im looking an entry point. I have been positive and saying for a while this evs y makes the best in the market. They still do. I believe i can serve for tors best by wait this modest set of q1 expectations. Your thoughts . Yes. For oing to look expectations versus what i think is a fair outlook. I did upgrade the stock to the 200 level. Part of my bullishness was china. Thought people were far too bearish on the financing outlook and on china, and we a lly do see china being real market. But, you know, if china ends a 300,000 unit market cai turn positive, absolutely but i dont see of in the realm possibility right now. Thank you. Craig irwin of ralph capital and joe osha of j p securities. Coming up, we hear why the administration came to the defense of the tmobile sprint merger and why they benefit will consumers. Thats next. This is bloomberg. By using large volumes aggressive like retreats local and western politics. New alphabethe c. E. O. Learning. This is bloomberg. This is Bloomberg Technology. Im taylor riggs in san francisco. Alphabets new c. E. O. Is getting a hefty paycheck. A total compensation package of about 242 million if he hits all of his performance targets. Cofounder is larry page. Earlier this month, for more, were joined by bloomberg technologies. What struck me about this, its the first time hey have tied performance, compensation, i should say, to performance. Now . I think in part because he man in charge has stepped down away from the company. I imagine this is part of time where the board is more among jewel. They have said they were not a managerial company and was the way they struck dhurd compensation. A lot of it was about retention. Built in ey instinct incentives to keep sundar around. Are some of those benchmarks . Tied to the stock of the company. Of the s still 99 sales. I dont see that happening in the next three years changing. Lly they have the selfdriving cars, there is some sort, speculative if they spin those Business Units out entirely, whether that would affect the stock the stock is primarily looking at a couple of things. One is just the growth of advertising business and any products they are mak