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First Move with Julia Chatterley
President Trump Reportedly Discussing Measures Against China, COVID- 19 Will Cost As Jeff Bezos Tells Amazon's Investors, You May Want To Take A Seat; Operation Warp Speed - The U.S. Government's Plans For A Vaccine By January. Aired 9-10a ET
Aired May 01, 2020 - 09:00 ET
THIS IS A RUSH TRANSCRIPT. THIS COPY MAY NOT BE IN ITS FINAL FORM AND MAY BE UPDATED.
[09:00:10]
JULIA CHATTERLEY, CNN BUSINESS ANCHOR: Live from New York, I'm Julia Chatterley, this is FIRST MOVE and here's your need to know.
Pandemic punishment. President Trump reportedly discussing measures against China.
COVID-19 will cost. Jeff Bezos tells Amazon's investors, you may want to take a seat.
And Operation Warp Speed. The U.S. government's plans for a vaccine by January.
It's Friday. Let's make a move.
Welcome once again to FIRST MOVE. Great to have you with us, as always. It's May the First, the day where many countries around the globe salute
their workers this year. We pay tribute to all the caregivers healing the sick, those who are helping keep us fed and safe and to those who are also
facing job uncertainty around the world as we fight this virus.
But it's a new month, and that represents new hope. Remember, we're all in this together.
New month and some softness, I have to say in U.S. stock market futures adding to yesterday's pullback. There are a couple of things going on here
as I mentioned -- fears over potential acceleration in U.S.-China trade tensions as a result of the pandemic, and tech stock weakness, too.
Apple and Amazon both falling premarket following earnings announcements last night. Apple in fact pulled their second quarter guidance due to
COVID-19. They just lacked clarity on what it looks like.
And Amazon as I mentioned there, warning of a loss as it ramps up spending. Global stocks had a pretty incredible run, I have to say last month,
retracing half of the losses that we saw from March when the pandemic shutdowns began.
Big gainers include the German DAX, too, up more than nine percent. The Japanese Nikkei up more than six and a half percent. The NASDAQ though, the
outperformer, rallying some 15 percent plus.
As I keep saying here on FIRST MOVE, the stock market performance is just simply not a reflection of the underlying economies and the pressure that
they are under at this moment.
We, I think, got a bit of a taste of that from South Korea again overnight where exports fell more than 24 percent year-over-year. Stocks at this
moment currently reflect both the stimulus, trillions of dollars of money pumped into the system, but also recovery hopes and optimism.
As Amazon's CEO Jeff Bezos said yesterday that now is not the time for his company to think small. I think that goes for all of us as we begin this
new month. Think big and once again do more to help.
Let's get right to the drivers. The U.S. President ratcheting up the blame game with China claiming to have seen evidence that the virus may have
originated from a Wuhan that contradicts an earlier statement from U.S. Intelligence and it comes as CNN reports, the administration is considering
potential retaliation in the form of potential trade measures and potential debt cancellation.
David Culver joins us now from Shanghai to discuss this. David, the blame game is nothing new, but this is the first time we're talking about
potential retaliatory measures from the United States towards China.
How is this latest news, whether it's potential retaliation, or the suggestion that once again, we're not clear on what happened and when, as
far as China's concerned, going down there?
DAVID CULVER, CNN CORRESPONDENT: It's not going over very well here, Julia. I mean, we are seeing this intensifying war of words as you put it between
these two countries, the world's two largest economies, and I go back to where we were at the outset of this outbreak here, back in In January and
the signing of Phase 1, the Trade Deal, something that you and I have talked about for weeks, if not months leading up to that moment, and it
seemed that things between the two countries were at a stable point.
And it's interesting that you mentioned the stock market being reflective of some optimism. You certainly don't see that in geopolitics here. I mean,
between the two countries, it is looking at a dire moment, and then perhaps even a decoupling, if not something far worse.
That's the indication, at least given by the heated rhetoric between the two countries. Now, its strategic rhetoric, because from the U.S. side of
things, you'll notice President Trump even going back to the start of the outbreak had called President Xi Jinping repeatedly his friend who has done
a good job in handling this.
He has been nothing, but giving praise to President Xi. However, in general, and more recently, we've seen this in the past week in particular,
he blames China as a whole saying that their mishandlings and their lack of action led to the outbreak getting as bad as it is, then certainly, the
devastation to global economies.
One of the things though that China will push back against is saying that this is essentially a deflection from the U.S. side of things for their
lack of preparedness.
China likes to say that they were giving the world enough notice as they were responding quickly, and that the world should have taken action.
[09:05:16]
CULVER: The reality is, on the ground, as our reporting has covered early on, is that there was cover up. There was mishandling. There was silencing
of whistleblowers, but China likes to say that that was done at the local level, and that the central government stepped in and changed the way that
they responded to this.
The U.S. simply primed back to that early time and saying that that's not the case, that they really delayed the rest of the world and knowing what
exactly would transpire here.
What's going to be interesting is to see how this plays out going forward, because as of now, they've avoided the conflict and the back and forth
between the two leaders, between President Xi and President Trump, and that seems to be intentional. It seems to be strategic.
However, the Chinese have not held back when it comes to going after Secretary of State Mike Pompeo. And in particular, they're frustrated,
Julia with the claims that this originated in a lab. You mentioned that lab. We were actually there about a week ago. It's in Wuhan when we
returned post lockdown, and it's part of the Chinese Academy of Sciences, and it's the Wuhan Institute of Virology.
And according to some U.S. Intelligence sources, that's one of the places they're looking into this having originated, however, U.S. Intel also
suggests that it's not man-made.
They're still evaluating these origin theories. There's nothing conclusive here. But it raises the question and from the U.S. side of things, it
allows to continue pushing forward with the possibility that China is to blame here for their inaction or mishandling, and it's something that they
won't back down on anytime soon.
It seems both sides are moving forward with this rhetoric. We just have to see where it leads to.
CHATTERLEY: Yes, and there's been a lot of loss of life and there's a lot of anger around the world, not just to think in the United States, or
perhaps what happened here and when one has an election to win. This kind of anger resonates, I think, with voters but at great economic cost
potentially if it comes back, as you quite rightly mentioned, David, to trade tensions going forward.
We've got enough wars to fight here with a virus, we don't need to create another one, an additional trade war. David Culver, thank you so much.
Great to have you with us. Thank you.
CULVER: Thank you.
CHATTERLEY: All right, now to a company on the front lines of this pandemic, well and truly. Amazon says it will likely spend everything it
makes this quarter on coronavirus expenses and perhaps a bit more besides, that likely to be around $4 billion dollars. So, no wonder Jeff Bezos is
warning investors that they may want to sit down before they heard that news.
Clare Sebastian joins us on this. Clare, we're all buying more online because of the shutdown, so, we knew that the sales for Amazon would
certainly be stronger. But the message there was, look, we're hiring a lot of people. It's costing us a lot of money to ship these products out and
net-net, we're going to spend more than we make here.
CLARE SEBASTIAN, CNN BUSINESS CORRESPONDENT: Yes, Julia, Amazon took the rest up, which is a lot of other companies haven't done and they issued
guidance basically saying for the next quarter that everything they make, they would expect to make about $4 billion under normal circumstances, they
will be reinvesting in COVID-related expenses.
That's things like safety equipment, PPE, cleaning, extra cleaning, all of the things they're trying to do to keep their staff safe. They also said
that they're experiencing less productivity because of social distancing measures, and you've been talking, I know, a lot on your show about their
efforts in testing. That is going to cost $300 million in the current quarter.
They're building a laboratory. They're trying to produce enough tests for their own frontline employees. They're not sure how far it's going to get,
but it's something they're willing to invest in.
But what was interesting, Julia, was that the range in the guidance they issued, $1.5 billion potential profit ranging down to $1.5 billion loss.
So, even with the $4 billion expenses, there is a chance that this company could still make profit in the next quarter, which is extremely impressive,
given the pressure they're under and the amount they're spending.
I think what the message we got from the company was that all the investments they've been making, particularly over the last year in
logistics, in one-day shipping, which of course, they're not really doing at the moment, all of that is paying dividends.
And they are hoping that they're going to recoup some cost efficiency in the next quarter as all of these new hires -- 175,000 people -- now come
online, and then they sort of get used to the new reality.
CHATTERLEY: Absolutely. And it's a bigger business and I should make that point as well about the web services. There's other things going on here,
the advertising as well, and it was a highlight, but it's quite interesting, Clare, because as Prime members know, they make the point of
saying, look, we're going to prioritize essential things. So, if you're putting an order in for a running machine, we get it, you want to be
healthy, but that's going to take time.
These are the higher margin things, the essentials that we all need, hand wash, for example. There's no margin in these and they're prioritizing them
and this is key for their business, too.
SEBASTIAN: Yes, and I think that's why with the revenue number which was a beat in this quarter that was up 26 percent.
CHATTERLEY: Right.
SEBASTIAN: But that's better than we've seen really over the last year, but only slightly, Julia. And I think that is an interesting one to look at
going forward, because of course, they have seen a huge surge in demand.
They've seen a huge surge in demand in particular for grocery where they've added 60 percent capacity.
[09:10:22]
SEBASTIAN: But another thing that Amazon is dealing with at this moment, and I don't think this has affected their results is this backlash that
we're getting from workers growing. It's small still given the number of people they employ, but a growing number of people in their fulfillment
centers, their delivery drivers are starting to organize. They are starting to criticize the company openly for not doing enough to protect their
staff.
And it is Mayday today, we expect to see some more walkouts, and I think for the moment, given the necessity of these workers, there is a slight
shift in the balance of power towards them. They do have a case and they are being heard.
CHATTERLEY: That's such a great point, and all of this eats into profits and that was the message that Jeff Bezos basically sent to investors today.
Clare Sebastian, thank you for that.
Now pandemic pain for U.S. energy companies, too. ExxonMobil has reported a quarterly loss of more than $600 million. Its first in decades.
Chevron increased profits, but warned of depressed earnings, and I'm quoting, as long as commodity prices remain low.
Matt Egan joins us now, and that's the big uncertainty here. The demand destruction, the excess supply, it's just going to take time. Talk us
through the bottom lines here for what these companies said and whether they gave us a sense of the outlook.
MATT EGAN, CNN BUSINESS SENIOR WRITER: Well, Julia, clearly even Big Oil is really hurting from this historic collapse in crude. ExxonMobil had never
reported a quarterly loss since the mega merger back in 1999, and that changed this morning.
As you mentioned, a loss of $610 million. That's a big surprise, a swing from a big gain a year ago and that was really driven by an accounting
charge of $2.9 billion that reflects acid impairments because of the lower oil price environment.
As you mentioned, Chevron's profits went up, but cash flow was weaker and the only reason why profits were up were because of asset sales and
currency swings.
Now, clearly these companies are hunkering down for a lower for longer period. They are worried about low oil prices. So, Chevron said they're
going to cut their spending by 30 percent. They're slashing operating expenses by 15 percent.
Chevron is also hunkering down. They are lowering their 2020 spending plans by another $2 billion. Keep in mind, they just lowered their plans six
weeks ago.
So clearly, all of these companies are very concerned and the goal at the end of the day is they want to protect their coveted dividends. The oil
companies in Europe, we heard from Shell earlier this week; Equinor, last week, they have already taken dramatic cuts to their dividends.
And right now Exxon and Chevron are doing everything they can to avoid touching their dividends.
CHATTERLEY: Yes, such a great point. That is the contrast between the big oil majors in the two different nations or the two different regions. We'll
see if it continues. Matt Egan, thank you so much for that.
All of these that we've discussed here, reasons why economies are under severe pressure to reopen and get back to business.
Here in the United States, many states including Texas, Utah, and Georgia are gradually reopening, as those stay-at-home orders expire. Although in
New York and in California, things remain pretty frozen.
More than half of U.S. states will partially reopen by the end of this week. But what about elsewhere in the world?
Well, I can tell you, South Africa is taking its first step towards reopening businesses. Eleni Giokos is live in Johannesburg with that story.
Eleni, the battle between the economic costs and the health risks of getting back to business is sort of an ongoing debate here. What does it
mean for South Africa in particular?
ELENI GIOKOS, CNN BUSINESS AFRICA CORRESPONDENT: Yes, I mean, it's a debate everywhere in the world, and in South Africa in particular, for five weeks,
we've been under very strict lockdown.
For the first time in five weeks, Julia, just to give you a sense of what it's like for average South Africans, you're able to walk or exercise
between 6:00 and 9:00 a.m. every day. There's still a curfew in place between 5:00 a.m. and 8:00 p.m., every single day. Buying of nonessential
goods was totally banned. They lifted that ban on things like winter apparel as we get into a new season.
But all of these things, you've got to keep in mind, are not going to be back to a hundred percent a capacity. It's this risk adjusted approach to
return of economic activity. That's what the government is talking about and it splits into five levels.
So, total lockdown is what we had until yesterday for five weeks. We're heading into level four and that means that nonessential commodities like
platinum and gold miners can get back to 50 percent capacity.
But you know, one mining company, the largest platinum miner in the world said to me that that's not just a switch that you can flip and get back to
50 percent capacity, you've got to think about screening. You've got to think about PPE. So, you're talking about massive production costs here.
And the government yesterday, the Finance Minister said that the lockdown is going to have a dramatic and sharp effect on economic growth in 2020 and
a huge hits on expenditure, because revenue collection is coming under pressure, and he says that it's going to come down by around 30 percent.
[09:15:26]
GIOKOS: And get this Julia, in South Africa, you cannot buy cigarettes and you cannot buy alcohol, even in level four. So, we're talking about a huge
revenue hit for government. And you would have thought that these two items were significant tax collectors, you know, I mean, it's incredible to kind
of see the economic impact.
And then you look at the small to medium-sized enterprises that are coming under pressure. You're hearing businesses that were already vulnerable or
very close to the tipping point, now announcing that they're shutting down, but don't forget that there's a huge message that's very clear that's
coming through from government, it's been concise. It's been decisive and we've been hearing from department heads throughout the lockdown telling us
in a very transparent fashion why they're doing what they're doing.
And it's all about saving lives and ensuring that you try and flatten the curve, and it seems that the lockdown that we've seen in South Africa over
the past few weeks has definitely assisted in that.
CHATTERLEY: Yes, absolutely. And Eleni, to your point, I think about cigarettes and alcohol, it's bad for you. So, yes, huge taxes on that huge
revenue capacity. But when I look at the spending collapse that we've seen, and I've looked at it very closely in the U.K. and in the United States, in
particular, alcohol spending has ramped right up. So, fascinating to see the contrast there as well between nations.
Eleni, thank you so much for that. Stay safe, please. Eleni Giokos there in South Africa for us -- one South Africa.
All right, still to come on FIRST MOVE, an urgent need to stem the economic fallout, but no guarantee of a vaccine anytime soon. We speak to a former
acting director of the C.D.C. about the pragmatic way forward on reopening.
And how to beat the quarantine 15, we're talking 15 pounds of course. The company, formerly known as Weight Watchers -- WW -- transforms to meet the
needs of the coronavirus era, and we'll talk to the CEO about how.
(COMMERCIAL BREAK)
[09:20:12]
CHATTERLEY: Welcome back to FIRST MOVE live from New York and we are looking at a softer open this Friday morning for U.S. stocks. Tech and
retail among the big losers premarket. We've also got biotech firm Gilead, the maker of promising new COVID-19 treatment posting better than expected
earnings and revenues.
It hopes to make more than one million treatment courses of that drug, remdesivir available by yearend. Investors certainly liking the sounds of
that.
In the meantime, Operation Warp Speed. That's what the White House is calling the program to develop a vaccine by January. Unprecedented, yes,
but it's still an eternity for people in lockdown and an economy in freefall as the pressure for a return to work and business mounts.
The Centers for Disease Controls has drawn up guidelines for a phased reopening, giving national guidance on how businesses, schools, churches,
mass transit and other organizations should safely handle the restart.
Joining us now is Dr. Richard Besser. He is the President and CEO the Robert Wood Johnson Foundation, and former Acting Director of the Centers
for Disease Controls. He led the response to the swine flu epidemic in 2009, and he now represents New Jersey on the council of several states
coordinating on reopening.
Fantastic to have you with us, Dr. Besser, thank you so much for joining us. So much to discuss with you. I want to talk to you first very quickly
about your thoughts on the operation to get to a vaccine. Do you think it's feasible and what's the probability that we do get a vaccine in that kind
of record time?
DR. RICHARD BESSER, PRESIDENT AND CEO, ROBERT WOOD JOHNSON FOUNDATION: Yes. I mean, everyone wants a vaccine. A vaccine would be a game changer, not
just here in America, but around the globe as long as it's made available everywhere.
So, I'm pleased that there's discussions about how would you ramp up a vaccine if one is available. But I don't think we can count on one.
You know, there are many viral infections that scientists have been working on vaccines for four decades, and it hasn't delivered. You know, I'm
hopeful with all of the effort that there will be a vaccine, but you need to make sure that the vaccine is both safe and effective, before you
envision giving it to billions of people around the globe and that can take time.
Som you know, my approach has always been under promise and over deliver. And I think it's, it's pretty -- it's pretty hard for me to see that there
would be a vaccine that safe and effective that's gone through the testing by January.
CHATTERLEY: Which is why building a bridge to get to that point, however long it takes is so important, whether that's testing or tracing or timing
and coordinating what reopening looks like.
How worried are you by what you are seeing across the United States, as states get back to business, while still seeing caseload in these states
rising.
BESSER: Everybody wants to get people back to work, the shutdown of the economy is devastating to people's lives, but as you do it, it has to be
done slowly, carefully and based on the best public health science, or you're going to see major rises in cases. You'll see healthcare overwhelmed
and people dying, that would have been preventable.
So, you know, I'm worried that the pieces that should be in place from a public health perspective, aren't there, and that is the capacity to
greatly increase testing. So, you're not just testing people who are really sick to see if they need to be hospitalized with COVID, but you can test
people with even mild symptoms.
And the reason that's so important is that even people with mild symptoms can spread the infection. So, you want to be able to identify those people,
provide support so that anyone who needs to be isolated can be isolated.
You know, in America today, your income and the color of your skin are determining how you're faring, and that's wrong. We need to make sure
systems are in place so that everyone can protect themselves, their families and their communities. And I don't see those pieces in place,
really anywhere across our country.
CHATTERLEY: Yes. And actually, the color of your skin in many cases is dictating how hard you're being hit by the economic crisis as well. The
measures here that are being taken are creating hereto.
Dr. Besser, in your view then, are we basically guaranteeing a second wave here by the actions that are being taken in various states?
BESSER: I don't think we're guaranteeing a second wave. I think that we need to do everything we can to learn from the different approaches that
are taken in different states.
Some states are being much more measured in terms of what businesses, what type of employment is being reopened.
[09:25:04]
BESSER: We need to look carefully to see who is being hit hardest as the economy reopens. But you want to see in place a public health system that's
able to do the contact tracing to identify people who may be at risk.
And you know, across our nation, we've let that public health system deteriorate, so that it's not able to really do that at the level that that
needs to take place.
And then you really want to see from the Federal government's standards, recommendations for every industry in terms of what should be in place so
that workers can go back to work safely and securely and so that as we reopen, we're not seeing a furthering of the disparities that we've seen
today.
CHATTERLEY: The problem is we're past that point now because even with -- and I looked at the C.D.C. guidelines that are reportedly being discussed
by the White House, some states are beyond that point already, and they they're going it alone, so having a national standard now would require
reversing in certain states, and that's politically difficult to manage, never mind, the health risks.
Dr. Besser, in your view, what's the most important thing now as we lack the right amount of tests, as we haven't ramped up tracing yet, as the
economy is struggling and clearly there is pressure to get back to work, what's the most important thing for businesses and for individuals to be
doing at this moment while we wait?
BESSER: Well, you know, I think that it's really important that people understand that as the economy reopens, we're not going to be back to the
situation we were in several months ago. People are going to still need to do social distancing. Stay home, if they're sick. Covering coughs when they
have them.
You know, we don't want there to be a false sense of security that saying the economy is reopening means we're back to where we were because if we do
that, healthcare will be overwhelmed.
There are many states where healthcare is just getting by in terms of treating people with COVID infection, but just think of all of the people
with heart disease and diabetes and cancer, people with cancer that that they don't even know about because screening programs have been put on
hold. All of the children who haven't been getting vaccinated.
Those things have to be up and running. You know, the healthcare system has to be much more robust to be able to do this safely and the thought of
getting back to the things as they were before, we are a long way from that being a possibility.
CHATTERLEY: Define long. How long do you think it takes us?
BESSER: Yes, you know, I think Dr. Fauci hit it right on that and then we cannot determine the timeline, the virus will. So, you know, hopefully,
there will be some decrease in spread in warmer weather, but we can't count on that. Hopefully, we won't see a big resurgence in the fall, but we can't
count on that.
And clearly, there will be COVID still around by the time flu season hits in the late fall and early winter, so we have to be able to plan for that.
You know, it's hard to for me to envision exactly what this fall will look like in terms of schools, childcare, higher education. It's not going to
look like it did before.
But looking to see how can we put together pieces of our society as we'd like them to be, as we're still dealing with this until we've got things
like vaccines, but vaccines, you know, could be, you know, more than a year away if we're successful and that's still a big if in my mind.
CHATTERLEY: Yes, the reality check. We're in for the long haul. Dr. Besser, thank you so much for joining us. Stay safe, and we'll stay in touch with
you, please, if that's okay. Great to get your insight.
BESSER: Please do.
CHATTERLEY: Thank you.
BESSER: Thank you.
CHATTERLEY: All right. We're counting down to the market open, and that's next.
(COMMERCIAL BREAK)
[09:31:46]
CHATTERLEY: Welcome back to FIRST MOVE. U.S. stocks are open for trading this Friday and we're being weighed down, I think by fears over a potential
ratcheting up of U.S.-China trade tensions, pandemic response perhaps from the United States on China, but it's also more cautious statements from
Apple and Amazon. Add in Exxon's announcements, of course, that it will cut 2020 CapEx spending by some 30 percent. They also reported a quarterly loss
as well, for the first time in years.
It's also a market holiday, we should point that out, too, for many investors around the world. It's Mayday. So, volumes today could be lighter
than usual. And not to forget, we've got fresh U.S. factory numbers coming at the top of this hour, too. These numbers are for April. It's the first
full month of shutdown. So, another historically weak read on that expected.
Paul La Monica joins us now on all of this. Paul, it's interesting to see a bit of softness in these markets, but also, just to look back at what we
saw over the past month and decades, performance -- outperformance in terms of the last month. We've taken back -- what -- more than half of the losses
that we saw in the month of March. Astonishing when you compare it to the underlying fundamentals of the real economies around the world.
PAUL LA MONICA, CNN BUSINESS REPORTER: Exactly, Julia, and I think the thing that all investors have to be grappling with right now is that March
was such a brutal month for the markets, and we know that was because investors were preparing for more bad news from corporate America, as well
as more bad news regarding just the spread of COVID-19 in the United States.
So, the question now becomes, was the selloff in March too extreme, or is the rebound that we had last month, too much optimism and that, you know,
we're going to see a slide as reality sort of sinks in again?
And I think, you know, at least for the start of May, right now, one day, of course, just a few minutes in the first beginning moments of trading,
we've got sobering realization from Apple, Amazon, Exxon and Chevron -- four of the largest companies in the United States that yes, things are
going to be tough for the foreseeable future and it's going to be hard to come up with guidance, and maybe April's stock rally was too far too fast.
CHATTERLEY: You know, it's a fascinating question at this time, and we were talking about this earlier this week about the sort of tech leadership once
again, that we've seen coming out of this for a number of different reasons.
But even these guys are warning that this is going to be expensive, this is going to be challenging. We can't necessarily give you a sense of what this
is going to look like if we don't have leadership from these guys. Does the broader market struggle, to your point?
LA MONICA: Yes, I think that is a great observation, Julia. Apple, Amazon, and then, you know, Microsoft, Facebook, Alphabet -- these are five of the
largest companies, you know, in the market, and they really have an outsized effect on all of those broader market indexes and ETFs.
Now, I think what we saw with Apple is that, you know, clearly, things are hopefully maybe going to stabilize in China, but what are iPhone sales
going to look like in the U.S. and other parts of the world going forward since they are, you know, behind the curve, so to speak with regards to
where they are with the COVID-19 outbreak.
[09:35:10]
LA MONICA: Obviously, things may be stabilizing in China. But that's not the case in the United States and Western Europe. So, if those big
companies can't provide guidance, and you know, you're looking at Amazon, they plan to spend a lot of money, too.
So, that will hurt profits and investors in the short term may not like that, even though it may be the smarter long term decision to spend at a
time like this to try and boost their revenue going forward. And also help out a lot of people that need it right now, because, you know, this is just
awful times for big parts of the country.
CHATTERLEY: It's such a great point. You've basically given me all the next questions that I need for my next conversation, Paul. So, thank you very
much for that. Great to see you as always, and get some rest this weekend, sir, please.
Let's talk this through. Apple, as Paul was mentioning there showing relative resilience during the coronavirus crisis. The company says its
revenue increased some one percent from a year ago in the first three months of 2020 while iPhone sales dropped compared to the same quarter last
year.
Record sales from services like Apple TV, Apple Music are also helping to keep its business steady. Wedbush Securities Managing Director, Dan Ives
joins us now.
Dan, great to have you with us and it really great to see you. Let's begin with Apple. What do you make of this? And I'm sure you were listening to
what Paul was saying there too.
DAN IVES, MANAGING DIRECTOR, WEDBUSH SECURITIES: Yes, Paul, as usual nailed it on the head. I mean, look, I would view this as better than feared. I
mean, if you look at overall numbers.
I think it just comes down to, you know, iPhone numbers, I think was about one to two billion higher than, at least, what we're expecting.
China, a ray of hope, but no doubt, massive uncertainty over the next quarter, too.
Investors that are buying this name for the other side of the dark valley into the next cold two, three, four quarters.
CHATTERLEY: Yes, and I mean, you know, as you said it was -- it was potentially going to be a horror show when we looked at these numbers.
Global lockdown, you've got Apple Stores closed all around the world. They got them back on track again in China, but it's trying to judge what
consumer behavior looks like.
Does it matter, Dan, when I think about what we've been through in the last six weeks and how attached to our devices, to streaming, to media in
general, it's what's kept us connected. There was a power for me in Apple and the franchise going forward beyond one quarter or two quarters that I
think this pandemic has proved.
IVES: Yes and look, you raised a great point. That comes down to 96 percent of consumers, so 1.4 billion devices -- they continue to buy iPhones.
That's why this is not I mean you look at over the next quarter or two in a once in a hundred year pandemic. It's what's on the other side in terms of
5G and a super cycle that's obviously delayed.
But also, you look at services. Take a step back. Services, that's the bedrock of the valuation 500 billion and 600 billion. That's why the stock
continues to stay in here despite some uncertainty and it also goes back to guidance.
They're not going to give guidance for June. It's basically like playing a game blindfolded darts at this point for Cook in Cupertino.
CHATTERLEY: Yes, why bother when everyone else is pulling their guidance, too, and you're probably going to be wrong. I think that's the key.
Let's talk about Tesla, please, because I talked about it yesterday when we got the results, but it was more about Elon Musk's tweeting and the things
that he said on the call, quite frankly, but I did notice that they've lowered their prices in China once again.
It is one area where they are getting back up and running with those model 3s. What do you think of Tesla's results here and the outlook for these
guys?
IVES: Yes, look, when you look at Tesla, the fundamental profile, China that's really the bedrock, I mean, when you look going forward, but
ultimately, well, Fremont is closed and obviously Musk had pretty strong comments.
But remember, every day they can't produce a car, they burn cash. And I think when you look at that stock, investors are very similar to Apple,
they're not looking at the next quarter or two, it's on the other side. This is a core EV play holding up much better than expected and the
profitability profile is key.
That's why this is a stock that still has gasoline. I think bull case, a thousand dollars is still the bull case in terms of how we view it.
CHATTERLEY: Wow. A stock that still has gasoline. It is really important though to think about these in terms of the short term and the pressures
and the longer term story.
Dan Ives, it is great to have you with us. Stay safe, sir, and I apologize to our viewers for a few of the technical issues there. Thank you.
All right, we're going to take a break. Coming up next on FIRST MOVE, from a luxury to a necessity. How those extra corona calories are putting
renewed focus on wellness. We speak to the WW CEO to discuss, next.
(COMMERCIAL BREAK)
[09:43:12]
CHATTERLEY: Welcome back to FIRST MOVE. The pandemic is putting our health and wellbeing front and center and some businesses hope to thrive on it.
The company formerly known as a Weight Watchers was well known for its diet plans and that partnership with Oprah Winfrey. It changed his name to WW
International in 2018 and expanded into general wellness.
Two years later, the pandemic has forced another transformation after initial fall in demand, the decision then to close its studios early on. WW
pivoted online.
In just six days, WW trained 14,000 coaches and launched virtual workshops. Earlier this week, it reported an all-time high of five million subscribers
who now provide daily updates on their wellness.
I'm happy to say Mindy Grossman is the CEO of WW and joins us now. Mindy, wow, is all I can say in terms of retraining, pivoting, providing online
services.
Talk to me about what you're seeing from people because you're seeing it now in real time and how you think perhaps our behavior changes in the
future and what this means for your business.
MINDY GROSSMAN, CEO, WW INTERNATIONAL: Hi, Julia. I hope all is well with you.
CHATTERLEY: Quite.
GROSSMAN: Yes. What is happening right now is going to have an indelible effect and a reappraisal of what is really important in life and to your
earlier point, health and wellness is not going to be a luxury, it's truly going to be a necessity.
And what we're seeing in real time, as you mentioned, we have five million members and because of the move to virtual workshop, when we needed to
pivot at the end of the first quarter, we have a purview into in real time conversations about what people are talking about.
We also have all of those members on our Connect platform. So, we're hearing what they're saying and we're also monitoring why people are
joining because our digital recruitments have definitely been positive in the last number of weeks.
[09:45:19]
GROSSMAN: And what they're all talking about is, I need to now get healthy for me and for me to be able to take care of others.
And what really is important to people is going to change and with what we're seeing now, the utmost importance is health and wellness.
The other thing that we're seeing, which is how we've built the company over 57 years, not just around healthy weight loss, but around the power of
community and motivation and support is more important than ever, particularly in an environment where our lives have all been disrupted and
our move over the last couple of years to certainly not abdicate our position around healthy weight loss, but to really build a full ecosystem
of health and wellness.
So, nutrition, activity. People are very much taking advantage of mindset and our headspace. Next week, we launch Sleep Tracking, which is a big
conversation as well right now, and then certainly the support of community.
CHATTERLEY: Certainly, Sleep Tracking. It's interesting what you say about community though, too. What are your plans for reopening studios because of
those that I've spoken to that have been part of WW, particularly in the past, being physically with people and talking about what you're doing has
been a vital piece of this.
Do you think your business can be and can exist in the same form digitally, or do you think some people lose track or disengage going forward,
particularly if the economy weakens further because there's still a cost here that perhaps it becomes a luxury.
GROSSMAN: Yes, so I would say that face-to-face community will never not be a part of what we do. But even prior to this crisis, we had announced over
the past two quarters that we were launching a new -- entirely new vertical of the company, which was digital, which all our five million members have,
plus virtual coaching as a new vertical of the company.
In addition, about 25 percent of our members are whom who want to have the face-to-face experiences. They have really been really lauding in a great
way these virtual workshop.
So, I think the key for us is to truly meet people where they are and give them the support they need in a way they need it.
Now, in terms of our workshop, safety and security is our number one priority and we will be very measured in where and how we open, and we'll
take that into account.
We do believe that there are people that are certainly yearning right now for that interaction in a safe and appropriate way, but there are others
that want the convenience of the virtual world, and others want their digital world with the community.
This thing that is consistent across any platform we have is the science based power of everything we're giving people to develop healthy habits and
rituals, which is another thing by the way that's really important for people right now, as well as the ability to embrace community.
So, even those individuals who have their virtual workshop, we've also established Social Connect group where they can connect with those people
even in between those workshop, so it's been very important.
CHATTERLEY: Yes, it's so important. I mean, we joke about the corona calories, quite frankly and sitting around all day, but it's about the
engagement and then being in touch with people, too. Mindy, great to chat with you. Stay safe, please.
GROSSMAN: It is very much around the engagement.
CHATTERLEY: Yes, it is.
GROSSMAN: Yes, thank you so much.
CHATTERLEY: We will talk to you again and we will continue this conversation. Great to have you with us. Mindy Grossman of WW.
GROSSMAN: Yes, stay well.
CHATTERLEY: You, too. Thank you. Now, to another industry undergoing massive changes, transformation challenges -- airlines.
We've reported this week, several have already warned of significant financial pressure that they're facing and what will follow. United posted
a quarterly loss of $1.7 billion, Thursday, and said it's getting $5 billion in government aid.
Lufthansa meanwhile losing $1.3 billion in Q1 and said 10,000 jobs are at risk.
Ryanair just today said it is shedding 3,000 jobs and that it would take two years to recover from the pandemic. Our Richard Quest has more on how
the airlines are adapting to the new COVID-19 reality.
[09:50:06]
(BEGIN VIDEOTAPE)
RICHARD QUEST, CNN BUSINESS ANCHOR, "QUEST MEANS BUSINESS" (voice over): Social distancing and air travel are contradictions in terms, with long
queues, evaporating leg room and invasive reclining, air travel is particularly ill-suited for our new coronavirus reality.
The pandemic has left global travel at a virtual standstill, and it is clear the way we fly will need to change before passengers will feel
comfortable returning to the friendly skies en mass.
Before the crisis, there was this massive drive to maximize capacity onboard, pushing the flying public ever closer together.
Now, airlines must embrace the exact opposite. At the very least, it seems the middle seat will probably stay empty for the foreseeable future, even
though that will make it almost impossible for airlines to make money.
The International Air Transport Association CEO, Alexandre de Juniac says ticket prices will have to go up.
(BEGIN VIDEO CLIP)
ALEXANDRE DE JUNIAC, CEO, INTERNATIONAL AIR TRANSPORT ASSOCIATION: In these conditions, there is no airline which is able to fly and make money on
these flights. So, it means two things, either we cannot or we have to increase the price of the tickets by at least 50 to 100 percent. So, it is
the end of cheap travel for everyone.
(END VIDEO CLIP)
QUEST (voice over): Airlines are ramping up other precautions. On JetBlue, Air Canada, Korean and Lufthansa, masks will be mandatory for the duration
of flights.
Emirates is limiting carry-on baggage to only the essentials. Meals are doled out in bento-style boxes to reduce contact.
Even the in-flight magazines have been removed from seat back pockets in case they carry the virus.
Expect to see cabin crews donning visors and gowns. Full personal protection equipment could be the order of the day. And Qatar Airways says
it's doing thermal screenings of its crew.
In spite of all these measures, Barry Diller, the head of Expedia believes flying and social distancing are simply incompatible.
(BEGIN VIDEO CLIP)
BARRY DILLER, CHAIRMAN, EXPEDIA: The idea that you can take the middle seat out of an airplane and have any kind of, quote, "social distancing" is
absurd. You can't. It does not work.
Social distancing works when it's complete, you can maybe clean planes better. Yes, that would be good anyway. But social distancing in these
kinds of arenas is a myth.
(END VIDEO CLIP)
QUEST (voice over): The Italian cabin design firm, Aveo Interiors gave us a glimpse of what the future could look like.
This shield could be fitted on existing seats, putting a barrier between passengers to increase isolation. A more extreme interior overhaul turns
the middle seat around entirely to keep contact between passengers at a minimum.
To be sure, the travel industry will reopen and we will take to the air again. However, for passengers like you and me, the experience we go
through, may never be quite the same again.
Richard Quest, CNN, New York.
(END VIDEOTAPE)
CHATTERLEY: Our Richard Quest there. All right, we are going to take a break here on FIRST MOVE, but coming up, an N.H.S. tribute like none other.
We will take you to Sunderland in England for a very special tribute to healthcare workers on the frontlines and keeping us safe. That's after
this.
(COMMERCIAL BREAK)
[09:56:08]
CHATTERLEY: Welcome back to FIRST MOVE. So, many of us around the world have made it a habit of cheering for our fantastic healthcare workers each
night. Well, these very special musicians appear to be making a habit of it as well.
[VIDEO CLIP PLAYS]
CHATTERLEY: This tunable tribute to N.H.S. workers took place last night in Sunderland, England. The nuns from St. Anthony's Convent of Mercy. They
sang, they danced and they clapped for caregivers, and some N.H.S. field hospital staff also joined in. It's amazing.
And finally, a huge congratulations to our colleague, Anderson Cooper, who is now a father. Yes. Anderson welcomed a beautiful baby boy, Wyatt Morgan
Cooper on Monday.
Anderson actually lost his father when he was just 10 years old and they share this name, so Wyatt, in tribute to his father. Anderson shared the
news during CNN's Coronavirus Town Hall on Thursday night, saying it's important in times of trouble to hold on to moments of joy and happiness.
So huge congratulations to him. Very cute little Munchkin.
And that's it from us. Thank you for watching. Stay safe this weekend, and we'll be back together on Monday. Thank you for watching.
(COMMERCIAL BREAK)
[10:00:00]
END
