tv Bloomberg Technology Bloomberg October 23, 2017 11:00pm-12:00am EDT
alisa: you are watching bloomberg technology. this is first word news. trump and joseph dunford said that the families of the people killed in niger deserve answers. president trump was with singapore's prime minister for a contract with boeing was signed. the prime minister said that the relations between the countries are prospering. trump meets with the philippines
president next month. duterte has been criticized for a crackdown on drug dealers and he also threatened to cut ties with the u.s. and eu. secretary of state rex tillerson made a surprise visit to afghanistan and iraq today, meeting with the leaders as he seeks to establish an alliance against iran and pursue the strategy to fight the taliban. the stops for the first as for tillerson has secretary of state. i am alisa parenti. this is bloomberg. bloomberg technology is next. ♪
emily: i am emily chang and this is bloomberg technology. cisco increasing its footprint in the cloud and a deal to buy broadsoft. 10 days before the election testimony. a california house representative put silicon valley on notice. the congressman joins us this hour. the tech earnings story continues this week in full. we preview what to expect from amazon, alphabet, and twitter. m&a spree cisco's continues, snapping up broadsoft in a deal that expands the cisco's presence in software and the cloud, which has been a priority for the company and it caps off a busy year of deal making. it marks the ninth acquisition for cisco this year.
for more reaction, we are joined by ed and corey in the studio. why is cisco buying broadsoft? cory: they were looking to acquire them. cisco is famous for this. it matches a lot of product areas where cisco already exists. that is software that is used for networks and communications platforms. they have a lot of the offerings. they have been competing against broadsoft for some time and, in some ways, it is a natural fit, and others, you wonder how it will be in a product by product category. emily: especially with the acquisitions this year. talk about the terms of the deal and what stands out. >> it is a reasonably large premium. if you look at it from its uninterrupted price from before the rumors first august started, it is a 28%
premium and that is healthy for the sector. it is not a huge deal, by cisco standards. takeover inr 200th their history, a phenomenal number. we have seen them do private market deals and this is unusual. from what we understand, it was a reasonably competitive process and there were others interested in this asset, and that in some ways is reflected in a decent premium that cisco ended up paying. emily: i interviewed the ceo and asked him about m&a, how open they are to bigger deals and more revenue-driving deals. take a listen to what he had to say. >> we are open to acquisitions that a line with where we are trying to go, large, midsize, and i have said that repeatedly. we think about innovation and we spend a lot of money on internal
r%d and we are focusing some of that into our core. i think we have bought between 15-20 company since i have been ceo. emily: are we going to see more of this? cory: the says been the this has been the bread-and-butter for a long time. they try to acquire companies and use and keep the people. from a shareholder's perspective, the number of shares go up because they issue so many shares as options in deals. even if this is a cash deal, employees are getting options or are seeing those shares convert. this is a longer-term concern. from a product standpoint, the notion you can contact the employee on their cell phone, in their corporate email, with a voicemail that follows them where they do not have to check
multiple devices to see what is going on. this is a unified messaging product and my question is about the additive revenue gain they get. traditionally, when cisco buys a product they compete with, they say they have a good product and ourt were going to take cisco salesforce and sell this everywhere. well, broadsoft was already selling. the question is where they can really add and use the leverage of this is cool salesforce to a product that is broadly out there. emily: are we going to see changes at cisco because of this or more of cisco selling what broadsoft has to offer? >> i don't think we will see any immediate changes. cisco has one of the greatest sales organizations and they are going to plug this in. this is not a huge deal for them or is not going to move the
needle. a crucial buzz term is recurring revenue. this will allow cisco to do more servicing contracts, rather than just servicing hardware and we are seeing the whole industry , because itrds creates more stability in an otherwise fall to an unpredictable environment. emily: i spoke to chuck and we spoke about how they are making this transition. how well are they weathering this big change in the business? cory: i will grade them on a curve. they have had greater success compared to all other big competitors. almost all of them have fallen to the wayside. if you look at what is happened to the hardware sales business, look at companies like hewlett-packard, dell, the sun business, ibm, all of those have face planted.
now they all talked about making the change to software, and all of them have failed with the exception of some. they get gobbled up by a software company. software is eating the world. that already happened to sun. you see the results in a prior life as a hardware slinger. this could also be a more recurring part of the business, but it has not been big enough to be that yet. emily: all right, cory johnson. thank you both so much. we will keep watching. a stock we are watching falling as much as 6% in the trading session. that is its biggest move since may. pressure is on the stock after amazon announced the launch of a gift shop site that went into competition with etsy. coming up member of the house of , a representatives as strong words for silicon valley. what he had to say next.
the firm is the first to offer trading services on that platform. a november 1, three of the top tech firms will testify before congress. lawmakers want them to answer publicly about russian interference in u.s. election. one congressman is not waiting until then to challenge silicon valley. he has penned a stirring op-ed in the washington post. task, he takes big tech to over a variety of issues, including elections and diversity. thank you for joining us. you say that trump used the tools of technology to win, despite silicon valley's overwhelming support for hillary clinton. it is as though he bested them at the game they invented. >> trump was very effective in using facebook and twitter to
get his message out, but a lot of these platforms were abused . they amplified fake voices that pretend to be 10,000 people. they trafficked in false news , and so tech needs to figure out how to solve these issues. we know it can empower individuals and extraordinary ways, but we need to fix the excess we saw in the 2016 election cycle. emily: russian interference aside, some would argue that social media has dramatic the increased the number of voices that are being heard. can tech companies be responsible for all of this? >> i think tech has played a positive role overall. it gave rise to barack obama and bernie sanders. i joke in town halls that the average person has more of a
voice with a clever tweet than i can in an empty chamber in congress. it has empowered people in extraordinary ways. now, they are a platform where people get 50% of their news and they need to do. one is a basic differentiation between fact and opinion. newspapers and television stations like yours have third-party verification and they independently check fax. cts. they can look at providing alternative perspective. they can look at what the journalistic responsibilities can be without suppressing the freedom of expression and i'm encouraged a number of companies are doing that. emily: you wonder how far these companies can go, how long they can distinguish between fact and opinion when our president may have a different opinion of facts than the facts.
>> i agree. it is a very difficult issue. there are independent third-party sites that can rate content. if somebody is saying that the sky is green or that barack obama is not an american citizen, they could at least have a rating and a verification, just like newspapers do, just like television stations do. or they can provide a link to alternative perspectives. companies,se tech look, social media is different than television. television is not as interactive . people aren't responding to me. technology is a person-to-person communication. for can't be responsible every single post. that being said, they need to move to journalistic standards of third-party verification so that they give users an informed perspective. i how much weid,
can rely on companies to do the right thing and what is in the best interest to society, rather than what is in the best interest of their business. and how much should the government be in charge of russian interference on these platforms? should there be government regulation? >> i think they are two different questions. that was silicon valley's tradition with david packard and some of the early founders. they talked about building technology in a way that would help society, help empower people. if you talk to tech leaders, that is what they really hope. they want the platforms to lead to a more connected world and create more jobs. tim cook said that business leaders have a moral responsibility to care about education and jobs. sunder pichai recently announced a $1 billion initiative to
prepare folks for the tech jobs of the future. so there is an ongoing awareness with tech leaders have to care about their contribution to jobs and places that don't have them and the conversation coming given that they are some the largest companies in the nation and has such great responsibility and so many viewers. on the russia issue, i think we definitely need better intelligence sharing between tech companies and the government so that they can get advance notice if there is suspicious activity and act on it. they need to adopt processing so they can look at bad accounts and bad actors the way that banks have. some of that is hiring more people. even if they hire thousands of more people live the vine, they probably need investments in machine learning and artificial intelligence to do some of that work. i am hopeful that a lot of it
will be tech coming to their own conclusions, but there will be a role for congress to create rules that tech can follow. you talk about the importance of increasing diversity, upward mobility. is this something that you think companies can do on their own? we know that the representation of women and minorities at tech companies is low. or is this something the government should regulate? it is in the tech companies own advantage to expand their imagination in recruiting. 45% of african-americans who have stem degrees or go to a go to a historically-black college or university, that is 45%. if tech companies want to expand where there is talent, they should form partnerships with historically black universities in the country. they should go to some of those colleges and recruit from there. the nfl, the oakland raiders,
they did that and started recruiting and it gave them a competitive advantage over other teams in the nfl. in a time where we have scarcity for engineers and tech talent and everyone is concerned google , apple, and facebook are getting all the talent, expanding the pool and going to places like this would make a difference. >> the question is whether or they should or should not, the should force them to do so or legislate various requirements for representation of women and minorities. >> i am not sure about quotas or government regulation, but i think that making investments in women's schools that focus on stem and providing greater opportunities and pathways to give incentive for corporate leadership for women leaders. i think that government can incentivize the creation of a pipeline and getting people into those ranks, but i don't think they should regulate a number filltech companies have to
as a quota. i think that with the going too far. emily: thank you so much for joining us. great to have you here on the show. on tuesday, we will bring you the latest on the congressional probe into the trump campaign manager russia with eric swalwell. that is at 5:30 p.m. eastern time. the competition for amazon second headquarters continues to heat up. the seattle-based tech giant proposalsceived 238 from across the u.s., mexico, and canada. amazon announced a search last month, promising to bring 50,000 new jobs and spending $5 billion on construction. only seven states refrained from entering the bidding process. coming up, competition is still going strong despite blue aprons post-ipo struggle. 's will discuss hello fresh plans next. this is bloomberg. ♪
emily: uber is expanding in europe. the ride hailing giant will open a new service center to provide assistance to drivers and passengers in france, spain, and portugal. in the meantime, they are seeking an appeal of the license ban. hellofresh is gearing up for its ipo this week. the company plans to be the number one player in the space by overtaking blue apron, which has seen its own challenges since going public this year. for more, let's go to our reporter covering this story. first of all, how does hellofresh avoid the fate of blue apron? >> that is the big question. they have to distance themselves from the blue apron narrative. blue apron since they listed in june and shares have
fallen 50%. they have seen customers declining. they have had to do a free structure. they have had to cut 6% of the workforce. things are not going well for them at all. luckily for hellofresh, they are doing well. their sales were about $143 million, of from $120 million the previous quarter. they are really trying to go for blue apron and target them. the ceo has said that they are going to overtake blue apron in the u.s. by the third of fourth quarter of next year. emily: what sets hellofresh apart from blue apron? fall say they do not because of the same things that cause blue apron to stumble? >> one, they are relying on a customer base.
they have 1.3 million active customers and that is really the strength. they are in 10 markets and they are moving ahead in the u.s. like blue apron, they are not profitable and they are relying on getting up there. emily: how much of a threat is the amazon factor? the amazonnow, factor is a threat to everything, from retail, to pharmacy, any industry you can think of. four hello fresh, it is the same. blue apron is down a lot because of amazon's deal with whole foods. that really affected investor sentiment towards that stock. people adapt to amazon in this new world is really going to be the question. emily: what are we looking ahead to with ipo's this year? we have seen many lukewarm failures, and we have seen a few scattered success stories. apron are twoue well-known failures. we saw a few good ones in
europe. investors have been receptive to the ipo's. this quarter there has been 17 of them. the market is running ahead of the u.s. market. this quarter they are expected to pick up. investors are looking for growth stories, and as we know, there is not a lot of growth to be found in markets. if hellofresh can prove they can generate earnings and sales, i'm sure it will do well. emily: all right. thank you so much. our bloomberg news reporter there. we will be following that when it comes out of the gate. coming up, a few tech giants report earnings this week. we will have a look at what to expect out of amazon, alphabet, and twitter. you can find our interactive and watch us live. this is for bloomberg subscribers only. check it out. this is bloomberg. ♪ retail.
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>> 2:29 in sydney. i am paul allen with first word news. china wraps up its party congress tuesday. will president xi jinping signal a successor? 200 people will be appointed to the central committee, 25 joining the politburo. thein that organization is standing committee. it meets weekly and makes all major decisions. rex tillerson has visited afghanistan and iraq, meeting the nation's leaders to discuss the taliban and iran. tolerson's first visit
either country was conducted in strict secrecy. president trump announced a commitment to afghanistan, .eploying 4000 troops here i singapore putting the brakes on vehicle ownership by stopping the rise of cars on its roads. from february, the annual growth rate will be cut from .25% to 0%. ensure theant to most productive use of land. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. >> a check on the markets. the asian session is waking up. a big slide for the kiwi as we learn about they governments
policy bet. aussie-kiwihed the crossed to the highest level since march. asian stocks set for a second day of gains. large caps reversing declines. asian shares eying a fresh high. the party continues for japanese 16ths the rally marking a day of gains potentially. consumer stocks under pressure. abe'sers losing ground as sales tax good heard that segment. given the record rally for the nikkei 225, analysts raising its targets for the benchmark. that is an upside of roughly 5%.
the catalyst for earnings and favorable global growth bojpects, expectations of etf buying. that is the market snapshot. this is bloomberg. ♪ emily: this is "bloomberg technology." i am emily chang. earnings season continues to unfold as some the biggest tech companies reporting this week. twitter and alphabet report on thursday. that is days before the companies are expected in court on november 1. also reporting thursday, amazon, looking for a new city to build its second headquarters. joining us now is mark, an analyst at rbc capital. what are the numbers you are watching? mark: whether they can sustain topline growth. that is the most important
number. on the cost side are acquisition costs. they are now spending $5 billion a quarter in revenue share with partners like google and samsung. the growth has been 50%, so it is the big issue for investors. this thing has been accelerating the growth, so the question is can the company manage those traffic acquisition costs? those are the numbers to watch. emily: can they? mark: we have done surveys, and we see growing and increasing adoption of google. i know that sounds odd at this stage, but we are seeing rising advertising interest, facebook but still google, so i do not think there is any change in that 20% year over year. emily: what about when it comes to youtube? we know they do not break a lot of that out, but we are always looking for more. mark: yes, i wish we had stats. i guess they are doing better with youtube than most people think. ishink marcu market consensus
$10 billion a year. i think the never could be closer to $15 million or $20 million. i think we are clearly seeing a migration online, and i think youtube, they are school and get up faster than people realize. emily: interesting. google, facebook, and twitter to testify before congress. does this issue of fake news, this issue of foreign actors interfering on these platforms, does that hurt the businesses of these companies down the line? mark: i do not think so. i will give you another take. you are telling me that someone could spend a couple hundred and swing a u.s. election? that tells me that advertisers should be allocating more of their budgets to those platforms. what other things could they sell? i am struck by how powerful these platforms are. of course, with that comes responsibility and whether these companies are living up to that responsibility. that is another issue. twitter is in a different category. it is experimental for most advertisers.
i don't think the impact advertisers or consumer demand. emily: so continued concerns about user and revenue growth with twitter. can they turned the tide? mark: there is a lack. it is expected to come in at $500 million. that is down 11% year over year to get last quarter, it was down 8%, so it is getting worse. it is hard to buy a stock in the secular growth industry where advertising growth is declining, and you mentioned users. last quarter, those monday average users declined. why is that happening given all the publicity around twitter? it probably says they have got a product problem, a usage problem, or they peaked out, and those are hard to fix. emily: they say they are taking a new approach to harassment which has been in the spotlight. they are doing things, and the "me too" campaign. do think it is too little too late or can they change the nature of a platform? mark: i think it is one of the
most important things they need to change. there is a lot of interesting , useful commentary on twitter. it is hard to see somebody right something thoughtful and not see something inappropriate written in response, and they know there is a safety issue. i know it is a tough line. you do not want to cut off people's ability to speak their minds, but i do not know how you do it technically, but if there is a way to remove it, that cesspool of content that is in there, remove that, i do not know that is possible. emily: how is that hurting? mark: i am sure it is hurting it dramatically. the mau's, i think it depresses usage. no question about it. emily: let's move on to amazon. we will see more about the acquisition of whole foods. how is that going? we hope. mark: i think we will get limited disclosure. we have very little data so far.
salesthink same-store accelerated. this is just one month, so who knows? i would like to hear the amazon playbook. we never really heard it. and the rest of it, aws, the cloud growth, and can those margins expand? mid-20's. it is the most profitable and fastest-growing part of the business. there is one thing that would crack amazon stock, it would be ws.ip u there probably would be some misexecution. emily: heading into the holiday season, anything particular you will be watching with amazon? mark: they are accelerating distribution centers and faster and faster delivery, and amazon said one day faster, so this should -- faster delivery should lead to greater customer satisfaction. we should see that ordering deadline going into the holidays shorter and shorter. i would expect them to have stronger christmases every year
simply because of the shortened delivery time. emily: all right, mark, always good to have you here. we will look forward to your reports this week. bloomberg is a global breaking news network for twitter. all right, feeling the heat of a crowded smartphone market, the newest creation getting a price cut of $200. the price is now $499. it originally cost $699. this comes after disappointing sales. customers who already bought a device are being offered a $200 credit. coming up, there is a new player in silicon valley to match corporations with startups. this is bloomberg. ♪
♪ emily: there is a new matchmaking service in silicon valley. it is not a dating app. they have announced a new targeted advisory service called silicon foundry. it aims to connect startups with big companies looking for insights into the latest technology that might affect their industry. the company says it aims to avoid a common bias in venture capital networking, where people make connections to support their own investments. neil.g me now is you call yourselves your own little switzerland. so how does this work?
>> we started in 2013 and have been at this for a few years, but this was our announcement today with the partnership with silicon valley bank, and we have been independent from day one. we work with corporations the world over, helping them to navigate the start of ecosystem. -- start up ecosystem. there are members that are part of our business model, and we view ourselves as a resource for the entire ecosystem. you call the members, not clients. neal: that is right. many venture firms have built out corporate outreach arms, executive briefing centers, is business development functions, who work for the fund and whose interests are in promoting the interests are in promoting the interest of the funds. we are an independent company. our model and revenue comes from our members. we work with all of the funds, in the introductions we make and the private events that we have, we have v.c.'s from all over the
valley and the world represented in those. emily: and of course, sherpa has funds as well, early stage and late stage. there is a wall in between? neal: there is a shared history there of the cofounders. we operate as an independent company, and we work with our members. our members want to find the best companies, the best emerging technologies. they want to be aware of the new business models are emerging, regardless of who has backed them or where they are based in the world. emily: companies like salesforce, who has strong connections in silicon valley, why would they want something like this? neal: each is different, where they are in their life cycle, where we can provide the most value. with salesforce, we tend to work network ventures portfolio. also, we spent all day long meeting with people around the world, so we can provide connections in europe and the
states in asia to their portfolio companies. emily: is the demand for acquisition, start up acquisitions, is that impacting the interest here? neal: i think so. when we work with these operations, it is for one or multiple outcomes. it is not all of them they are looking for. they are looking to identify startups where they can be a customer or perhaps a partner or strategic investor. as we know, a third of all venture deals also have a bank, and, of course, m&a activity. and are all a spectrum start as a customer relationship , then blossom into m&a. emily: on that note, where does your responsibility to a member stop? do you help the acquisition from beginning to end, or do you handoff? neal: it depends. again, it all starts with identification. we have members who have been a part of the diligence process on the m&a deal. they are in the business of deal sourcing and qualify. what we do not do is we do not
compete with banks. we are not incentivize. that is an important part of our model. there is a flat, annual fee. our incentives are entirely aligned and unbiased, so we are not pushing to do a deal, but we are supporters and help you through the deal processes. emily: you happen at this for a couple of years now. what are some of the biggest success -- you have been at this for a couple of years now. what are some of the biggest success stories? neal: we used to have a single page, even though we have been at this for year. the types of things we have done for our members, it is strategic investments. we have a european business that made a three quarters of $1 billion deal, and we had a hand in that diligence process. a lot of what we do is more qualitative. we are helping our members, providing insight and intelligence and making recommendations. those don't make their way into press releases. but that has a big impact in terms of their own product roadmap and their ecosystem.
emily: there have been some dramatic changes in the funding environment. softbank with their $100 billion vision fund. the cofounder of paypal told me it was like the asteroid in the room. how much do the changing macroeconomic conditions impact the weather in switzerland, let's say? neal: i think one of the things we have seen is demand where our message has resonated, within international players. when you talk softbank, you are talking asia, alibaba. we have so many of these players coming here. so i think maybe where we see it play out in switzerland, many of the companies we are working working with, we have members from the middle east, japan -- so it is truly a global series of corporates who are increasingly committing attention, time, resources, dollars, boots on the ground here in the valley. emily: ok. all right, ceo of foundry, thank you. great to have you here on the
show. coming up, the automation wave is cresting. how it will impact jobs from silicon valley to wall street. that is next. and a quick programming note. bloomberg's alix steel will be in washington at the annual meeting. tune in for a great lineup of guests, including the goldman sachs president and others. catch that conversation at 9:00 a.m. eastern. this is bloomberg. ♪
♪ emily: the rise of automation and artificial intelligence is causing anxiety about upheaval in the workforce. the fear is that technology will leave millions of americans unemployed in the next decade. the founder and ceo of a messaging platform that develops products for online messaging and analytics spoke with julia chatterley and joe weisenthal and scarlet fu. isit is good if it
implemented correctly. we work with vodafone in the u.k.. rates about 70% of the time, we are getting a positive hit rate, and to answer the question. unfortunately, because it is like the wild west, people are throwing up things on facebook and different messaging platforms, and sometimes it works, and sometimes they do not, but we are working with t-mobile and vodafone, citibank, and we do it at a different scale. julia: how many of those were answered by a not real life person then go on despite the interaction to a live person, and how do you think that would change? because then we are talking jobs. robert: today, it is still through human interactions, but what i can see over time, we do 15 million chats a month on our platform, so we see these conversations, but over time, i believe that 80% of the conversation will be automated, and 20% will be a human being, we have a thing called tango
where a human and a bot or together, side by side, and that seems optimal. julia: in call centers, and you are saying that 80% of those in at some point in the future won't be there anymore? robert: actually, i think it is different. i think they will transform their businesses. today, they are answering a lot of questions over and over again, which is not high value, where they will end up going is more on the high-value customer engagement. they are kind of stuck. they are not happy. even the agents are not happy. you call up call centers and you experience what an agent feels, but there is a better way to use them in the business today. >> does it matter what customers want? i am thrilled when i call my bank and get a human rather than pressing zero repeatedly until someone comes to me. robert: we do messaging. consumers want a message. 80% of the time, they are using
a device to message friends and family. now when we implement that with businesses, that is where consumer behavior is. nobody wants to call. you are forced to call. we want answers to questions, where you press 1, press 2, often, we are put on hold, and we lose our valuable time. with messaging, that is the pivot that is happening right now, that is going to change our lives. anchor: why do you think this is going to change? the unemployment rate is 4.2%. for all of the talk of replacing jobs, there is very little evidence that it is happening large-scale. productivity, which you would expect to see surging if there was an a.i.-led change in the pretty muted.is robert: 10 years ago, putting would be people on the other
side of the cameras, some things are automated now. the reality is, there are jobs that become automated, and then you guys are here talking, so i am saying there is the anxiety of the uncertainty of it. am i going to lose my job? i think there is a lot of hype about it, but the reality, someone who is behind the camera now has a job somewhere else. someone here is now doing some thing else that is high value in the bloomberg organization, so things will shift, and you cannot stop it, but things are shifting, and in customer care, it is happening very quick. julia: we talk a lot about a.i. mark zuckerberg. you are really punchy about steven mnuchin. you said he was naïve about the impact of a.i. robert: yes, when i hear the word "a.i.," i don't know what we are about. i put it under the category of "ai."
everybody throws things under there. i look at it more like automation. what automated tasks can we get done where we do not need a human on the other side of that? that is where i think he is a little naïve, because even a company today, when i talk to hr person or can i ask a conversational interface? so "a.i." is a catchall for the fear and anxiety, but things will get automated to natural language processing and that is what is happening in our enterprises. julia: governments are not yet keeping up. robert: that is another story. we can automate government. i think things like the irs, things like asking the government questions, there are big parts of the government that you could automate today that we would want. more importantly, we as consumers, we decide what we want to do, and if we want automation, if we want to preserve our time and get through these very basic tasks
and have some help from an automated service, we will take it, and we will drive the change. no one can stop us. emily: that was robert locascio. ceo of life person on bloomberg's what did you miss. and finally a story we have been watching, snap says it has overestimated the demand for its unitscles with many sitting and warehouses. this is another setback for the struggling social media company. last week snap cut 18 jobs in its recruiting department and decided to slow down hiring for next year. and that does it for this edition of "bloomberg technology." a reminder, we are live streaming on twitter. that is all for now. this is bloomberg. ♪
yousef: reports say a dark horse candidate is back in the race. saudi arabia continues the drive to beat its dependence on oil. we are live in riyadh with the attempts to diversify the economy. yousef: rex tillerson makes surprise trips to afghanistan and iraq, hoping to raise pressure on the taliban. anchor: china reps of the 19th party congress