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good tuesday morning i'm carl quintanilla with morgan brennan and jon fortt at post 9 of the new york stock exchange markets reacting to the apple news over the weekend. a lot of news for the long holiday weekend coming in. >> we'll e get right into that with apple it is sinking this morning and taking the dow down with it after warning it's going to his second quarter forecasts on revenue due to cocid-19, the coronavirus. our guest joins us now >> good morning. >> you feel confident this is a shorter-term issue even though to my eye apple seems to be backing away from that shorter term position, explaining why it's no longer sticking to its previous guidance saying it's going to update us in april. what makes you still feel pretty good about the limited impact of

this virus >> yeah, i mean, apple did say that but they also gave more color on the fact that overall they're strong but there's no quantity final guidance so there's no help on the press release they gave. the biggest issue seems to be the supply chain ramping up. facilities are getting opened up in china but the utilization rates are pretty low we took a hard cut to our numbers for the march quarter but some of these supply chain issues do not necessarily translate into demand destruction. you might barely see some demand go away, but i don't think it equates to a tremendous amount of demand destruction. in other words, some of the revenue gets moved further down into the fiscal year for apple, so i think the biggest impact you'll see is in march quarter given the fact it's still a fluid situation with the virus

and factories are reopening but many of the laborers or personnel have limited mobility. there's a requirement on people density. a few things need to be sorted out. that seem s to be the challenge right now. >> you've covered the supply side just now. apple also highlighted impacts on demand, particularly in china. but i've even got a talk outside of china we were talking last week about mobile world congress in barcelona being canceled over the weekend, facebook canceled its global marketing summit in san francisco citing the coronavirus. ibm dropped out of the security conference also in the u.s., citing coronavirus do we have a full enough handle on how this virus is affecting not only demand in china but -- >> the reality is that if you look at some of the momentum on the widest end, the rate of, you

know, infection is slowing down, so i think wall street typically looks at the secondary, which seems to be moderating a bit there are a lot of unknowns but some silver lining is the facilities in china are beginning to open and people are slowly come back to work compared to a week or two weeks ago. to your point, if you're in the same situation a month from now, maybe numbers have to be readjusted and that's one of the challenges apple has in giving out a quantity number. >> krish, this is the second time in 13 month ps has slashed guidance due to circumstances in china. i think it raises the question for a market that has long been

seen as a growth point for apple. is it now the biggest challenge, especially when you see how much exposure it does have both in terms of iphone demand and in terms of that supply chain >> it's a very valid point and you're beginning to see the impact today both in terms of demand and supply, like you highlighted, morgan. the thing i would argue is what they've done over the last night or nine months has moved things out of china these things don't happen overnight given the complexity of the supply chain, but at the same time i would argue that the bear argument is you need to slow the index down, which makes sense in today's environment, but at the same time, there is a big opportunity for apple in china on the services side on the iphone side, they've been losing some st. maryhare, but oe services side there's growth

left >> would you expect more production to move out of china for an snl. >> it's tough to say but i would say over time that would happen. do i see it happening in the next couple years? it's probably tough at this point. but foxconn in india is ramping up output already, so you have certain pieces in play, but i don't have an exact figure like when that's going to happen. >> krish, more broadly, what do you think the impact is going to be on supply chains that run through china? because we just had throughout the past year big questions, pressure tradewise being placed on companies to diversify out of china. some did that. some did it perhaps less than they might have otherwise. then we have this different coronavirus impact, which i imagine might be pressing some companies to think about, well, regardless of trade issues, maybe we need to think about having some other options. when we will know whether companies are thinking in that way, even beyond the trade

issues because of kron vice, co, or china is so essential companies are putting all their eggs in that basket? >> companies have been moving supply chain out of china. some have facilities in china and are moving it to places like malaysia, et cetera, so i would say that the moment of this happening, it's probably not happening at the fast pace you and i would expect, but the reality is it's very easy to put numbers on a excel sheet and make ut work, but in the real world, moving the supply chain, the logistics, trying to have a philosophy in a third party in china sf china takes a long time. >> i'm glad you brought up the semiconductors you are tuned into that space. we've seen the pressure, the tension on huawei from the u.s.

ratchet up pretty markedly in the last couple days, whether it's what i would suggest is bipartisan official commentary out of the munich security conference over the weekend, you have the justice department charging huawei with theft and trade secrets and now headlines that the u.s. is considering regulatory changes to essentially cut off huawei from global chip suppliers more broadly. how does this play out what does it mean for the names you cover in the space >> it's a very good question i think people are still trying to figure out what's going to happen, because the reality is a lot of this you're hearing is, you know, bits and pieces from here and there there's not been an exact mandate on what needs to be done the bottom line is it is a negative impact. if you look at huawei as part of the semiconductor supply chain, or if you look at some of the manufacturing facilities like tsm that makes for huawei, it's a very important part of the

semiconductor ecosystem. i think any of these rules or regulations that goes into effect will have an impact it's hard to quantify at this point. semiconductor is about 15% of the global spending and another 15% is tsmc and both are exposed to huawei or china, so you're probably looking at that could be something but we still don't know how it's going to play out. you can see some of the stocks are down they're having like a wait-and-see approach because, you know, things could change on a dime with regards to what happens on the political spectrum >> that's why we have to keep our eye on it. thank you, krish >> thanks. meanwhile, plenty of headlines to sort through on facebook today mark zuckerberg calls for more regulation for facebook in munich and brussels over the weekend despite the impact it

might have on the bottom line. followed that up in the "financial times" that was rebutted by george soros who writes that zuckerberg and sheryl sandberg should be removed from control of the company. who better to join us than roger mcnamee. before we get to facebook. you had a comment on apple >> i agree with what krish was talking about relative to apple. the one thing we have to watch ow v out for as investors is what is going on inside china because there's restricted movement and a great deal of fear, legitimate fear about what this means inside china. and i think it's put a lot of pressure on the government and right now they're trying to isolate people, trying to protect the country from further outbreaks. but i think the lack of information is almost certainly going to' e v create issues. that's why if i were apple, i would be cautious about the demand side of this because i think people are going to be legitimately concerned about, you know, social interaction >> even after they get the okay.

>> i just think the okay will initially be something they may be skeptical about simply because there hasn't been transparency, right? i just think this is the issue with president trump's whole nationalist strategy, is that it reduces trust and we need trust for trade, you need trade to have great markets when trust breaks down anywhere, there are ripple effects everywhere >> as far as facebook goes, from people who missed all of this commentary over the weekend, what should they know? >> mark zuckerberg came out with an op-ed, facebook comes out with a large post in which they're talking about it's important for governments to come in and provide some sort of regulatory framework as always, the thing is framed in a way that's extremely convenient to facebook and this time european regular ray v v v -- regulators came in and said this is censured stuff

mark's best move is to concede something substantive, which is to say they have this change in election advertising, to sit there and say, i'm sorry, you're right, we need to have fact-checking of ads, there are a whole set of things going on at facebook, whether it's libra, their attempts to merge the data settles of the various products, all of which regulators are concerned about. if mark were smart, i think held concede a couple of those things right now in order to buy himself time in order to repair regulatory relationships >> that would be a huge reversal >> i'm not expecting it to happen >> you don't think it will happen >> my point is if it doesn't happen, they're setting up a confrontation where facebook is in a uniquely horrible position. the eu from a -- >> call the bluff.

>> eu has nothing to go after them with hammer and tongs do they have the power to pull it off mark is making the bet that they don't, but this is a tough situation because it's not like nothing is going on here states spinning up regulations you have the federal trade commission and the antitrust of the justice department who i think have begun processes that as they gain momentum will be very hard to stop. >> if i'm arguing mark zuckerberg's side, i'll say i tried to be tentative before, making conciliatory moves toward governments like the eu, didn't get me anywhere, and that's why i said from here on out it's not about liked, it's about being understood i'm going to stake out facebook's position and drive it with it home with the best arguments i have naseems to be the direction he's going at. >> look at the stock price it's worked. the eu is saying we're entering

a new phase and the question is does mark persist with the strategy that got him and his stock to here or does he listen to the feedback from the eu and say time for another plan? there are still things i concede that do not destroy my business model. this is a question about strategic retreat or dying on this hill. >> could he change the rules in europe, would that make sense for him from an optics standpoint >> his issue ishe wants to be automated globally all the pressure from globalization is staying consistent with his business model. if you look at things like political advertise organiing oe merging of the data sets, he would have to get them globally to get the political benefit he's looking for i think it's a question of of if he's sitting there saying i am not going to accept any criticism or pushback from any government, that's sort of where he is today. that is a position that, you

know, invites challenge. >> i think to your point, this idea of globally, one of the things -- other things he mentioned in his "f.t." op-ed is they would support efforts to create a fair global tax for the internet, social digital tax as well how much do you think the messaging, the commentary from zuckerberg over the weekend was geared towards europe versus say the u.s. or some of these other marketplaces >> it feels like it's totally geared towards europe, but at the same time, it sound and looks as though the europeans went, sorry, wrong answer, go home, do your homework, come back with a better answer. >> finally, soros. >> yeah. >> how can -- should bt he be excised from this debate do you applaud him >> i totally applaud him this is a topic he has been front and center on since the beginning of 2018 and he's put a tremendous amount of effort into understanding it for the same reason we were talking about

china before these are global issues and he has strong feelings about how global markets operate and i think he believes with a lot of justification that the power and balance enjoyed currently by internet platforms like google and facebook is a threat to normal functioning of capitalism globally >> has his commentary become so politically loaded, his name so politically loaded, when he weighs in it ends up being counterproductive? if soros likes it, i'm against it >> but not in europe that may be true in the united states, but i think in europer he has enormous credibility, particularly given what he v is saying is precisely what the european regular or thes are saying he's giving them support facebook has done a great job of playing regions against each other and the question is, is that still working or not?

at least in europe, it sure doesn't feel like it >> good stuff, roger thank you. see you soon >> my pleasure >> apple continues to drag down the dow this morning, down about 0.7%, 211 is points. we're back in two. ♪you make everything... groovy...♪ done yet? yeah, yeah, sorry, sorry. you sure? hmm.mmm. ♪come on, come on, wild thing. if you ride, you get it. geico motorcycle. fifteen minutes could save you fifteen percent or more.

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welcome back to "squawk alley. oyo just recently announced massive layoffs, cutting a third of its workforce seema mody has the oyo ceo, who has often been roughed to as massa's other son. >> thank you thanks for joining us today. >> thank you so much for having me here, seema i'm not sure if i fully agree with that introduction, but thank you. very excited to be here. >> let's talk about the restruck which you shalling efforts you announced in the last 24 hour, cutting 20% of your workforce in india, layoffs in china and a third of your workforce in the u.s. what's behind this vision as you try to cut costs >> sure. this is not necessarily from perspective of cost. at the end of every year, our management regroups and thinking about things that we did right and what we could improve.

we as leadership acknowledged these restructuring points this we need to make sure we focus on locations and cities that are more profitable, focus on making sure we reduce the duplication of effort ace cross-countries and that we consistently use technology to be able to serve our customers. a very important outcome of this is even after the restructuring, we still have over 25,000 employees serving oyo across the world. >> how do you make sure you're not the next -- i've been speaking to hotel owners in india, complaining about inflated occupancies, not being able to bay the government how do you address these concerns >> sure. to begin with one of the things that's consistent if you speak to hotel owners or customers across the world is the proposition of oil is very valuable for them. having a large number of hotels,

improving infrastructure, increased occupancy is very valuable in the united states, asset owners have given five, six, seven hotels to oyo and seen significant innovation we need to deliver production and service and deliver financial results. we have issued our financial ruts for last fiscal right now in the past three years we have delivered in india market, consistent improvement in ebitda last year, fiscal-19, you can go online and find the report for '19, you can see we reduced our net losses from minus 24% to minus 14%. we believe that's the part to continue upon. >> let's talk about china, 9,000 hotels there, your second biggest market how has that impacted demand and occupancy? >> sure. this is definitely a situation

that we're keeping a very close eye on to begin with, i think it's too early to be able to give a view as to how coronavirus is going to impact business, but at the same time we are trying to keep as many of our hotels open as possible, including in huawei and hubei. we're trying to support doctors as well as people who aren't stuck in the province to come in and stay at the hotels and have a convenient experience. we're sending tens of thousands of masks, large numbers of employees donating anywhere from one day to one month's compensation, like me. >> it's too early to tell how it will affect the company. but how is it affecting occupancy rates right now currently? and i guess what would be your sense of how things are unfolding on the ground through the lens of oyo? >> sure. generally speaking, as you imagine, travel is a segment that needs to be closely looked at in a situation like

coronavirus as it was during sars as well what we're seeing now is different cities have different results because it's very province oriented. the provinces highly em pacted like hubei are impacted more than other provinces but at the same time, there's this new hospital they've built which came up in ten days. around the hospital there are a couple of oyos which we are serving to doctors and others at really low or no prices. people are coming to support the situation on ground as we see. >> i want to go back to the restructuring and softbank as port of a way to look at that. we've all seen what's happened with softbank kind of retrenching, you know, the next vision fund, vision fund 2 if it happen, the money will come from them it sounds like more than from others nape ore not funding start-ups as much.

for the likes of your company, has the runway been shortened? there's not that much of that capital we saw in 2017, 2018, pushing you to continue to grow even if there were big losses. some is about that rationalization, right >> good question to begin with it's important for me to acknowledge that there is a very strong feedback that companies have gotten worldwide regardless of who their shoulders are, in terms of saying that profitability is the direction people will see. i was telling seema earlier that if you see on a yore over year basis, at least the mature markets, we see our business in three different phases, phase two are gross margins coming in and phase three are markets which are new, like that of u.s. or latin america so phase one markets like india or europe, you've seen our net losses improve on a year-on-year basis, so companies will need to stand on their own two feet. specific to the question on softbank, it's important to know

that oyo is a board-run company with a great group of board members. softbank has representation on the board. beyond that, we have independent board makers like betsy askin. it's phases, let's make the right decisions for the company. we have a balance sheet of $1 billion, so we have a long way to go to keep up with the plan >> we'll see what 2020 brings to you. thanks for being here. >> thanks for having me. a reminder, if you can't get enough "squawk alley," and who can, really, watch us anytime live or on the go. record it on the cnbc app. download it today.

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moving in midsession, and that's, in fact, what's happened in the past few moments. session lows, down do260 or as h coronavirus and a trade war are taking their toll on california ports. jane wells has that story. >> hey, guys yeah, this busy port complex fell 5% last month compared to january a year ago, flat to slightly up. but the real concern is over the horizon because ships from china are being canceled and take a look at these figures. while manufacturing capacity is reopening in china, transportation of goods over dry land from the factory to ship, that's called dredge, it's not coming back as quickly you can see the smaller numbers. so even if you make something, that doesn't mean the government will let a truck pick it up. we'll see that on our side in terms of impact. >> i have this view this uncertainty in the industry has

the potentialover goi of going m uncertainty to chaos because of what potentially the coronavirus would be on the supply chain >> mario says the coast guard will let cargo on shore but keep crews on ships shipping companies, which are taking a bath, they're losing an estimated, again, one-third of a billion dollars a week, they may raise shipping rates when shipping resumes at normal levels we're still dealing with $370 billion in goods still subject to tariffs in china, which is impacting the ports. >> thank you we have expediters international earnings this morning, ocean container down 13% talking about the fact they haven't seen disruptions like this really ever before. it's definitely a key one to watch. jane wells, thank you. >> yep time for a news update

brian sullivan has that for us at headquarters. brian? >> jon, thank you very much. here's what's happening. president trump threatening a lawsuit over robert mueller's investigation. in a series of tweets this morning he called the special counsel's findings, quote, badly tainted. it's ee's uncertain on what grs the president could sue. jury deliberations are expected to begin in harvey weinstein's sexual assault trial. he walked into court this morning in new york city he is charged with raping one woman and sexually assaulting another. he denies both charges the massive flooding in central mississippi is in danger of spreading to neighboring states officials say as many as 10 million more people may be in danger of catastrophic flooding. on a happier note, a festival of lights to dribrightn up dark winter skies copen ha n haig -- copenhagen i

opening the event. that will put a smile on anybody's face despite their tendency to grimace throughout those nights which last like 26 hours or something back to "squawk alley. >> brian sullivan, thank you when we return, kara swisher weighs in on mark zuckerberg's regulation op-ed

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the ftc continues to look into the acquisitions of amazon, apple, alphabet, and microsoft in the last decade a question our next guest poses is whatcool things have we los thanks to these mammoth companies starting innovative start-ups? kara swisher joins us. great to see you >> good to see you >> it's easy for me to take the other side in this one because i remember yelp, groupon, living social, arguably should have taken offers to get snapped up facebook was once on the other side of that mark zuckerberg offered a billion dollars for facebook from yahoo when it was young, didn't take it snap didn't take the offer from facebook these start-ups are selling in a lot of these case, not like they're being held at gunpoint isn't that good?

isn't that a market at work and if they believe in their idea they can be the next zuckerberg or -- >> except nobody's got a gun here nobody's being held at gunpoint. no one's saying that's the irk shoe i think what it is, and i quoted ben horowitz at the end, and he's just not investing in these things all i'm saying is that if we don't know what the innovation might have been, we don't know where it could have gone what would happened if mark zuckerberg had sold at that time or felt pressured to sell? he didn't feel pressure because one, he controlled the company, and two, nobody owned social media. most of the competition right now are in places in tech, places like health care, food, all kinds of climate tech in areas that don't have one or two big winners. when you have one or two big winners you don't know what isn't getting invented what would be innovations in search had not google dominated everything and continues to dominate what would be innovations in social media there's nobody able to break through and that's my point. the ftc just needs to look at it

and see what happened and what happened in the room, and if these acquisitions were made for something called a killer acquisition, which is to get a competitor out of the way, or if it was done far good reason. it's fine to be skrutd necrutink that >> we were the days when there were social media picture-type apps, all over the place, flooding the market. bts were investing in a lot of them i talked to tony about a year ago, founder, crowe kro of sh shopify. none of the vcs wanted to invest and that was good for him because he didn't have an overfunded start-up in the space. he had a great idea and able to power forward. couldn't you argue the fact that the vcs have backed away from investing in these sort of things could lead a way for the smart, committed founders who are willing to grow slow to

actually make some progress instead of having a dozen overfunding investors? >> overfunding has been an issue, from day one in silicon valley that's not new these companies almost have no choice at some point you saw them testifying on capitol hill there's no way to break in right now to digital advertising there's no way and there will be no funding sometimes every now and then you have a shopify or one company that breaks through but not this sort of cornucopia of ideas that i think is critically important to innovation. people abandoned whole areas i'd like to know how it happened i don't think there's anything wrong with the government, i think it's instructive to go in and figure out how these companies decide to do this. we don't know what didn't get invented if someone is bought up and they're in the rest/invest period it was good for them and their shareholders but not good for consumers. is it good we have one company

in search, one company in e-commerce i think most people would argue that, you know, a very fresh industry that has lots of rivalries for the best of consumers and for the best of innovation i don't think that's an unusual thing to argue at this point i think it's funny we are arguing over that. >> yeah. kara, i wonder what you think this increased scrutiny of these big tech takeovers, what it leads to, whether you' soon v an unbundling of some of these previous past acquisitions, whether you think it throws cold water on future acquisition or if it continues to be business as usual >> i don't think they'll unbundle them. they're looking at maul acquisitions where a lot of the action hatches it's easy to look at amazon buying whole foods or facebook buying whatsapp. but a lot of action happens towards the bottom to me, i don't think they'll unbundle them but they're going to scrutinize them for the first time one of the things that's

critical to remember here is none of these acquisitions or companies have been scrutinized very much, and there are no regulations on the book to internet companies in order to do correct regulation, you have to understand how it works and how it happens to do smart regulation i think everybody wants smart regulation nape don't want just, now we're going to unbundle them you can't just run in and clean up a mess. you have to figure out how you got the mess and figure out what's best going forward. >> kara, i also want your take on mark zuckerberg's latest. he'll calling for more regulation on a trip to munich and brussels just days ahead of proposals from the eu on that front. >> yeah. >> you have this f.t. column seems like maybe a tarbais by strategy >> what's what i was thinking. >> do you think it's going to work do you think it fits with his understood not liked ang this will year? >> he's got so many different

things going on this year. that didn't work, so now he's like, please, regulate me. well, please regular late me how? he wants to be part of it. he want assay in it. they have lots of pr people and lobbyists. they'll weigh in but this is a train already on the track. then he's saying i'd like a train. the train in europe, they moved far ahead and quickly compared to our country this is already happening so might as well get on board and figure out a way to work with them what's more interesting is the comment he is made at this security conference i think in munich where he talked about that -- he's sort of suggesting they be regulated like a telco, between a telco and a newspaper, and i don't understand that correctly, because telco is a little more of things pass through them and they aren't liable for things say on a phone line newspapers are much more liable for what's in their newspapers i'm kind of fascinated it sort of stopped me. like what does that look like? is that a utility?

and mark has talked when he started facebook, facebook as a utility, if you remember it's an interesting continue septs and i'd love to see where it goes. >> yeah. i wonder if he used telco and newspapers because nobody's afraid of them anymore >> just you. >> they're not scary i don't know >> no. >> i should point oumt we are owned by a telco, comcast. >> yes >> maybe some people are scared. >> and our media company, so we're both >> yes car a are, thankkar kara, thanks >> still more to come on apple's big drop rick santelli, what are you watching today >> 154 yield in tens why can't we get rates up at wt 'lta aut th'shawel lkbo after the break. arket, find the best instructors in the world, and tie it all together with a world-class software experience.

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closing in on an almost 1% decline now for the dow, down 281, s&p down almost 25. let's get over to the group and get "the santelli exchange." hey, rick. >> good morning, carl. a lot of interesting things in the news, but i like to look at the macro stories. of course one of the banks in europe, in germany is calling for jer mn government to create a little fiscal horsepower, maybe a little help, a little stimulus money and the reason of course is because europe isn't doing very well we have the japanese economy

toying with recessionary levels, parts of europe like germany, who are very close to recessionary levels with regard to their gdp reads, as are thing a regalts. in the end, it shouldn't be shocking to anyone that interest rates are low. but the pool of negative interest rates continues to grow and even in the u.s. with the stock market cracking out wards -- records, not necessarily today, interest rates continue to walk along the bottom line. a one-year chart of ten-year note deal, look at the congestion right there between 1.46, which was september and october, a bunch of bottoms in the low 1.50s, recently a botto on january 31st around 1.50. the reason these are all so important is because we have so much congestion at such historically low yields, pretty much everybody is just assuming it's matter of which session we

take it out. here's ten-year notes going back ten years. this is the part we were looking at on that one-year chart. in july of 2012, july of 2016, 1.36 of course the big bottom here is 1.46 but ultimately all of these bottoms make everybody nervous because that's number one, two, double bottoms what's this guy? most assume this guy will take it out and we won't have a double bottom anymore, but keep in mind, this could move in between 2% and 1.50 for quite a while, and that congestion certainly with the chart p portends to me, be careful if we move above 2%. and here's the one that gets the quickest momentum, anything to downside pretty much is dollar index being so strong when long-end rates are so low seems counterintuitive think about it from the fed side of the yield curve

short rates are too high and the fed needs to lower them, an argument for another day but the dollar index, now at the best levels in 33 months, may of 2017, but look at how close we are to these of 2016 just about 3 1/2 cents but that takes us back all the way to december 2002 so what's the point of this chart? unlike the chart for ten-year note yields, this one just looks like it wants to keep going up and anything over 100, look for huge momentum as many shorts chase to cover to get out of of their positions. jon fortt, back to you >> love those charts, rick don't ever change. stay tuned for an exclusive with omega's leon cooperman he joins us for the entire hour. we'll talk apple's big warning, the state of stocks, 2020 elections, his new buys. that men ay.'somtswa getting warmer.t

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worst day of the month across the board for stocks. we are down 256. we got all-time highs on big names today, alphabet, costo, amd. but it iha ts rdo escape the apple drag "squawk alley" is back in just a few moments.

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call unitedhealthcare and ask for your free decision guide. learn more about aarp medicare supplement plan options and rates to fit your needs oh, and happy birthday... or retirement... in advance. welcome back take look at shares of leidos this morning beating on both the top and bottom lines better than expected guidance. shares up 10% right now. outperforming the s&p and the aerospace and defense etf over the last year. joining us is leidos ceo and chairman roger krohn

thank you for joining us. >> morgan, thank for having me we have had a great ay >> you have seen revenue growth, non-gap earnings growth, increasing margins are you able to sustain that growth this year especially given investments with some of the recent program awards you have gotten and the acquisition of two high-profile acquisitions. >> the three largest programs that we have won as of late are all in what we call the government contracting world are in protests. our programs, they really were not even executing on those programs yet that and the two acquisitions we announced the dinettics and l 3 harris security inspection and detection automatic nation business haven't edeveloped yet. we have growth and momentum

carrying us into 2020. >> the jeddy cloud contracts and the controversy there, given court case there, the challenge by amazon shines a light on big tech getting further into government contracting right now in a bigger way. what does that mean for your company? increased competition? or more opportunities to partner? >> right now, it is all about partnering, we are agnostic as to how the cloud provider and frankly the technology that the commercial firms bring into the government world just accelerates the digital transformation our position is to be very close to the customer and help them accelerate their digital transformation, help them save money on the back end. then we are very agnostic as to who we go to as a cloud provider. >> you bought dinettics. just under $177 billion. it is a portfolio that promotes hyper sonic weapons, directed energy, drones, space.

it is a more focused product firework whereas leidos was more services focused why does this make sense for you? >> because those technologies we saw in dinettics completely align with the department defense strategy and the things mike griffin have identified to be essential to the next decade. dinettics started as a services company and still have a large service component. we saw the move the dinettics to add more product portfolio to leidos but we still want to have a strong mix of services and some products. >> finally, i want to get your outlook for defense spending i guess the government budget in general going sboo fiscal 2021, last week's budget proposal to keep the top line for defense spending essentially flat but when you dig down, the focus on next gen technology. what is your proposal and how

does it play out >> we are pleased to see agreement on the top line. i think that's going to be true on both sides of the house now the appropriators and the authorizers are working flew the details. it will be a strong year i think it will be regularly close to normal order relative to the defense process which means we should get some certainty at the end of the summer or into the fall, hop flee a bill before the presidential election. for us, they are spending more money on the emerging technologies that's good news for l eerks ido. >> thank you for joining us. shares up leidos up 10%. >> thanks morgan. in case you missed it, elon musk is not impressed with bill gates tweeting he found conversations with him to be underwell. ing it bill gates bought a porsche electric vehicle rather than a tesla. that didn't go over well.

>> maybe that's the way to insult bill gates, to say your conversations with him were not impressive otherwise what do you say? he is bill gates. >> bernstein and morgan stanley upped their price targets but keep their market perform. the judge is back. let's get to the half, with coop carl thanks. i'm scott wapner, front and center, the apple bombshell and enshoeing selloff in stocks after the company says it won't meet its revenue target because of the coronavirus what happens to your money if the engine of this market suddenly starts to sputter it is 12:00 noon and this is the "halftime report." virus fears taking a bite out of apple. semis getting slammed on the apple news is this a buying opportunity the traders take their positions. the record rally, the 2020 elections, and his new bets,