Microsoft will not acquire TikTok’s U.S. operations after ByteDance rejected the company’s offer.
The Redmond, Wash.-based tech giant was seen as a front-runner to acquire TikTok after President Trump set a mid-September deadline for reaching an agreement to continue TikTok’s U.S. operations.
In a statement, Microsoft said its plan to acquire TikTik would have been good for the app’s users while meeting “the highest standards” for security and privacy.
“ByteDance let us know today they would not be selling TikTok’s US operations to Microsoft,” the company said in a statement Sunday. “We are confident our proposal would have been good for TikTok’s users, while protecting national security interests. To do this, we would have made significant changes to ensure the service met the highest standards for security, privacy, online safety, and combatting disinformation, and we made these principles clear in our August statement. We look forward to seeing how the service evolves in these important areas.”
The Trump administration is citing suspicions that China-based owner ByteDance is sharing user data with the Chinese government. ByteDance and TikTok have denied those allegations.
One potential roadblock to Microsoft’s offer was China’s new export restrictions on AI technology, which put control of TikTok’s core algorithms in question.
In early August, Microsoft said it was negotiating the purchase of TikTok’s service in the U.S., Canada, Australia, and New Zealand, planning to own and operate the service in those markets if it could reach a deal with ByteDance.
At the time, Microsoft said it “would ensure that all private data of TikTok’s American users is transferred to and remains in the United States. To the extent that any such data is currently stored or backed-up outside the United States, Microsoft would ensure that this data is deleted from servers outside the country after it is transferred.”
The South China Morning Post reported Sunday that ByteDance would not sell or transfer its algorithms.
Microsoft said previously it was working with Walmart on its bid.
Oracle is now the only other company reportedly involved in acquisition negotiations. The Wall Street Journal and NBC News reported late Sunday that Oracle won the bid, though the company has not officially commented. The deal is “likely not to be structured as an outright sale,” WSJ noted.
Oracle might seem like an unlikely candidate given its focus on enterprise software and lack of social media market share, but it’s worth noting that co-founder and executive chairman Larry Ellison is a Trump supporter. The acquisition could also help the company’s advertising and data business, The Guardian noted. Oracle is reportedly working with TikTok’s existing U.S. investors, including General Atlantic and Sequoia Capital.
The reported purchase price is between $20 billion and $30 billion.
Sure, it seems unusual to have Oracle run TikTok. But who will have the last laugh when the TikTok influencers start recommending HR and Finance systems in all their videos.
— Aaron Levie (@levie) September 14, 2020
Here’s the take from WedBush analysts, who expect that TikTok will be shut down in the U.S.:
MSFT put on a statement tonight that ByteDance has let the company know it would not be selling TikTok’s US operations to Redmond. MSFT in its statement said it was confident its proposal would have been good for TikTok’s users while protecting national security issues. We believe Microsoft would only buy TikTok WITH its core algorithm which the Chinese government and ByteDance was not willing to budge. Given the need now to get a green light from Beijing after its export rules were changed a few weeks ago, TikTok’s days in the US likely are numbered with a shutdown now the next step. While Oracle is technically the remaining bidder, without willing to sell its core algorithm we see no TikTok sale on the horizon heading into the September 15th deadline. Oracle could be a technology partner, but a sale/divestiture of the US operations for TikTok remains the focus. Unless some last minute changes, ByteDance heads into the White House deadline this week with some dark days ahead as the plug now likely gets pulled on the TikTok app within the US.
In an executive order issued Aug. 6, Trump cited a “national emergency with respect to the information and communications technology and services supply chain” as the reason for the moratorium.
TikTok last month sued the U.S. government over Trump’s executive order, though the lawsuit is not expected to directly impact deal negotiations, Axios reported.
Microsoft is involved in a separate $10 billion cloud computing deal with the Department of Defense, which earlier this month reaffirmed Microsoft as the winner of the contract over Amazon.