The coronavirus takes a toll with tech leading losses. Earlier, apple cut its revenue guidance for the march quarter with the outbreak continuing to impact the iphone maker supply and demand. The coronavirus is impactful, but not permanently impactful. In other words, it is a temporary blip. On the demand side longer term for apple, i dont see any issues so that gives me a lot of confidence we will see a nice rebound when this is over. The bad news is, apple made a big bet on china. 20 of revenue, a huge part of the supply chain. If the virus isnt contained, this will continue to be a problem. In longerterm, it china and the was a u. S. Are likely to be at loggerheads. I think the virus could be a problem longer market thing. There is no better ceo to handle the current challenges then tim cook and while it is currently concerning, having him at the helm is very reassuring. It is quite hard to shift production in a number of weeks. Emily we got more reaction from the Senior Research analyst at cowan who joined taylor riggs and paul allen to say why he thinks the supply disruption wont hurt demand. What you are seeing today and since apples big announcement yesterday was the fact that a lot of it, besides demand, it is really supply chain disruption, and it has taken a while for the supply chain to ramp up. It seems there is an opening in china, which is a positive but at the same time, the virus is still a threat and people are being cautious. It is an effect that will play out over the next month or so. We assume it will take, and of march, which is end of march quarter, to get 100 position rates and that is a double whammy from the fact there is some slowdown in demand, but it is a supply. Taylor weve gotten guidance from apple saying they would miss on the top line. Fold that into your estimates on the bottom line. Krish first and foremost, apple did not give quantifiable analysis. We look at the numbers and took a cut on the biggest impact will be on the iphone, because people do buy it as a cyclical product. That is one of the biggest reasons for a big cut. It does impact gross margin, but apple has said they are going to invest in the modem business, you which they bought from intel and of december. They will invest in tv opportunities, so eps was down to 25 , from 3. 03 to 2. 24, mainly because the optics will stay high because they will invest in future opportunity. Mainly because the optics will stay high because they will invest in future opportunity. Emily for more on apple and the broader impact of the coronavirus on global markets, we are joined by mark lehman, president of jmp securities. Does apple highlight how much more revenue guidance and uncertainty we could really start to see from a lot of these companies . They are clearly ahead of the game. The first Big Tech Company to mention coronaviruses impact in the Third Quarter and i dont expect the last. It is amazing how resilient the market was today. We got along preview at market close yesterday and speculations on chat boards how bad the market would be today and the nasdaq was up today. It shows the amount of liquidity in the market, the amount of demand in the market and frankly, there must be a lot of people shorting the stock because no one was expecting the stock market to be slightly up today. Taylor what is driving the resiliency in the tech market . You clearly have numbers that have been as good if not better than people expected. Rates really dipping this year. Look at the 10year from january 1 to today, it has been enormous in terms of the bond. Conversely, the yield has gone down. There is a lot of liquidity in the marketplace and these liquidity bubbles i dont want to use that word completely a lot of people have been waiting for a correction and waiting for a correction. We just havent seen that. We saw at the end of 2018, we havent seen a big correction. I expect more and more people have capitulated into this year, despite news from apple being negative for the market. Paul the supply change our these supply chains are so huge and interconnected, is all the bad news around the supply chain out of the way yet, because as the saying goes, there is never just one . Mark i think there will be more news ahead of us because everyone has been anticipating those numbers he mentioned earlier about the number of deaths and number of new cases go down precipitously at some point and that has not happened. The longer this goes on where we are highlighting how many new cases there are, the longer this virus goes down and the longer supply chain is inflicted. It is a seasonally slow period. We have the Chinese New Year at the same time, so it is a seasonally weaker period for tech. That supply chain takes a long time to ramp down and like a good engine, supply chain takes a while to ramp up so i would expect more announcements over time. Emily that was mark lehmann of jmp securities. Apple is considering giving rival apps more prominence after criticisms it provides an unfair advantage to its own product. Here is Bloombergs Mark Gurman with joe weisenthal. App, one ofefault the preinstalled apps is very key. These are the services you will use and like you said, they are hard to replace. You send me a text message with a web link, it will always take me to safari. There is no way, even if i have chrome installed, to change that given apples own safari edge over the competition. That is what apple is considering changing. Giving an option ios 14 to switch from safari to chrome in that example. Is this to get ahead of potential antitrust concerns over the use of its own platform . I think that is a big part of it. This is something the house, the u. S. Government, was asking questions to apple about. To had a story in october detailing this issue. Apple, seeing what is happening to Google Search and android in the eu. But it is also a bad user experience. Lets say im a Google Chrome user and im not able to use it to its full potential. Maybe ill switch to android. Apple wants to avoid that as well. How many apps are we talking about that could be affected, apple apps . Apple has 38 apps preinstalled on the phone, our count. The big guys are firefox, Google Chrome, outlook, gmail, yahoo mail, the list goes on. Even if they give the option, you got to figure the default apps are going to remain the defaults for 99 of users. Mark thats the best way to put it. 99 arent going to think theres anything different, but the 1 is really key. Apple, even though they have a billion and a half customers now, that small user base of people who are early adopters, diehards of the company, super loyal, they influence their friends and other people. On the security issue, is there any issue this would compromise from a security aspect that some people find attractive about the iphone . Mark in some cases, allowing some features to not default could cause security concerns, but in terms of the web browser and mail, those are not big concerns that will be influenced. Bloombergs mark gurman. Morgan stanley makes the biggest acquisition by a wall street firm since the financial crisis. We will talk with Ceo James Gorman about why the bank is buying e trade. If you like bloomberg news, you can listen on the bloomberg app, bloomberg. Com, and in the u. S. On sirius xm. This is bloomberg. Emily Morgan Stanley is diving deeper into retail by buying discount brokerage e trade for 13 billion. According to james gorman, the acquisition is a response to customers wanting more access to Digital Banking. We spoke to gorman shortly after the announcement thursday. Weve had a strategy in place a long time to continue to diversify and build out our Balance Sheet wide businesses. We did mesa west, a small Asset Management deal ive always felt e trade was an incredible brand, an Incredible Company with great technology, clearly doing stuff on the digital side at a pace that was ahead of where we were so we had the constant debate of build versus buy. We felt we were in the position to make a bold move and went for it. I was e trade the right grexit why why was e trade the right business as opposed to a newer business . You said digital was a big deal, did you consider robin hood . James i like e trades business model. They got a lot of clients, the huge workplace business, one of the best Digital Online banking businesses and they sit on 600 billion of assets. At it to 3. 1 trillion, stock member sitting on 600 billion, 21 billion in combined wealth revenues based on margins of 30 . It is not comparable. Robin hood is a completely different kind of business, so i like real businesses, real clients, real profits, theyve got all of it. Real clients, but much different than Morgan Stanley had traditionally taken on. How does this change the fabric of Morgan Stanley . James less than you would think. I dont think it changes the fabric much at all. The stock clients are all Corporate Institution so that is not different at all. For many of us, having Advisory Relationships have online accounts whether it is banks or Financial Institutions providing advice. The channels in the last 20 years have come together. What youve got to do is build businesses that make your clients happy, be convenient for them, not to yourselves, and for our Financial Advisors, already our clients, including myself, our consistently are constantly working electronically with Financial Advisors with Morgan Stanley. The channels have converged. 13 billion is a pretty hefty price tag for e trade. What do you tell the people on wall street who might believe you are overpaying . James i think they are jealous. That doesnt bother me at all. We pay to 3 billion premium and made 8 billion in revenue, it is for the half months of revenue. Foreign half months of last years earnings to buy and a in Iconic Institution with an Iconic Institution with 600 billion in assets, three hundred billion in revenues that will improve all our financial models. This is a nobrainer from that perspective. This morning, you said this would create a fullscale digital bank, checking, savings. James they have it. E trade also has 4000 employees, you have more than 15,000 advisors in your Wealth Management unit. Do you need 20,000 people to run that part of the business five years from now . James we actually have a lot more. You are talking about the registered advisors, which we have about 15,000. All the supporting staff, Customer Service reps, ops managers, risk management, and technology and support around it, it is probably a 35,000 person business. There are obviously some jobs, but most of this business just fits neatly inside Morgan Stanley and will be run as e trade inside Morgan Stanley. As the bank goes digital, does that mean fewer employees to make it happen . James goodness no. This is an opportunity for clients to expand with us. They are doing Digital Banking with other institutions. Now they can do it all at Morgan Stanley. We think we have 7 trillion of assets between e trade and Morgan Stanley. We want to bring those funds here. You have the number one stock trading business in the world, as well. Jp morgan is trying to knock at your door when it comes to that business. How does the e trade acquisition and tear trading business . James that is the equity business, number one in the world. We were number five post crisis. Technology within our trading platform, i think e trade could be added and vice versa. We are excited about using some of their technology, not just in Wealth Management but across our Asset Management platforms as well as equities and fixedincome. Emily that was Morgan StanleyCeo James Gorman. The deal prompted a downgrade from wells fargo security Senior Analyst mike mayo. He spoke with Bloomberg Vonnie quinn and guy johnson. You cant be a bank analyst without being a parttime tech analyst and this acquisition of Morgan Stanley buying e trade is about Digital Brokerage and Digital Banking. I think it is a fair question, but 13 billion for a company that is the stock market sensitive . This interestrate sensitive at a time when you have peak Retail Investor engagement and high stock prices . We are not saying this is the bottom. The timing of this acquisition, a 10 pe company paying 15 times earnings for another company just for starters is not ideal. Guy ive heard a lot about the corporate stock prime business and the fact this is a fantastic business and undervalued at e trade. Does that argument not stack up . It goes in the whole idea of revenue synergies. If a Brokerage Firm can get customers through a variety of ways, digital delivery, or through the workplace and to the extent Morgan Stanley has a broader suite of products, if you are an e trade customer, you should say this is fantastic. I would love to be in e trade an e trade customers even more right now because you have so much more of Morgan Stanleys research and products and ways to really have that experience. Having said that, if you are a Morgan Stanley shareholder, that comes with a lot of extra complexity, and i think cost over time. We think the synergies expectation, just like with the other mergers ive seen over three decades might be too optimistic. Guy do you think it was a competitive process . Do you think others were involved . Mike we have no idea at this point, and i cant wait to find out. There were some changing control provisions put in place for management just in january. Certainly a lot of questions about the timing of those, but could other buyers coming here . Emily that was wells fargo security Senior Analyst mike mayo. Coming up, lithium batteries have long been touted as the solution to carbon emissions, but that means other environment and ethical problems. Details,. Next. This is bloomberg. This week, tesla got a new street high target from the most bullish analyst on the street, raising to 928 from 729, citing teslas solar and battery products. Meantime vulnerabilities in , hightech cars are under scrutiny after analysts said they were able to trick a tesla into speeding during a test. Researchers put a strip of electrical tape over a 30 mile per hour speed limit sign, causing it to mistakenly read 85 Miles Per Hour and accelerate. Tesla has not responded to the study. Electric car maker tesla has agreed to buy cheaper batteries that do not use cobalt for its model three production in china. The lithiumion batteries are a main alternative to cobalt and nickel products. Lithium batteries have long been touted as the solution to carbon emissions, the production of lithiumion batteries might mean more problems in itself. Bloombergs alix steel has more. Alix the 20th century was the age of the internal combustion engine. The 21st century will belong to the battery. By 2040, the majority of cars sold will be powered by batteries. They will emit less pollutants, but the batteries have their own challenge. Lithium is a water guzzler. If lithium prices stay low, it may not be worth the cost to mine. The riskier method of pumping saltwater under ground to extract it. Nickel is used in cathodes and boosts density to allow electric vehicles to travel faster and farther. It is not clear whether minors in indonesia can even keep a steady stream coming. Cobalt presents an ethics problem. It helps keep the battery cool during charging and discharging, but they are terrible conditions for miners in kongo, the top producer. Some workers reporters have found are as young as four years old. A cleaner car may not be made more cleanly. Emily for a look at how other automakers are trying to keep up with tesla, alex spoke with the alix spoke with the former tesla engineer and ceo of lucid, a potential competitor. She asked how long tesla can dominate the ev market. Tesla dominates because they are the leader. It is dominated by the german automakers. We need to compete with core competitors. Mercedes s class is a core competitor car. Coexist 20 of room to alongside tesla. Money. Ly issue has been automakers pouring money into this. Even the battery prices are coming down. Are you going to need more money to make all of this happen . Peter well, weve got great funding in place. We are in a healthy financial place for the start of production. We will need funds to accelerate the growth of the company because we have a window of opportunity for the next few years. We want to accelerate our growth. We will need more capital to do that and want to accelerate the growth of a sustainable mobility to the world and right now, that is what mankind needs, a Widespread Adoption of renewable, sustainable mobility through renewable sources. Alix can you put some numbers on how much more you think you will need to raise . Peter i dont want to be too specific here because it is early days, but the auto business is capitalintensive. We are talking nine figure sums. Alix you feel the market is open to that, because they seem to punish traditional oems when they have the fire people and cut their buybacks and reward tesla. What is the response . Peter the traditional oems are s are