Microsoft Looks To Buy TikTok US Operations

Microsoft has confirmed it is in ongoing talks to buy the US operations of TikTok.

The company said chief executive Satya Nadella spoke with US president Donald Trump about the negotiations on Sunday, and said it plans to conduct a full security review of the app.

It said Microsoft and ByteDance are exploring a deal that would see Microsoft owning and operating the TikTok service not only in the US, but also Canada, Australia and New Zealand.

“Among other measures, Microsoft would ensure that all private data of TikTok’s American users is transferred to and remains in the United States,” the company said in a blog post.

‘Preliminary’ talks

It cautioned, however, that the discussions remain “preliminary”.

The company’s comments follow national security concerns over the collection of personal data on US citizens by ByteDance, a Chinese company, and broader pressure on Chinese tech firms amidst a trade war between the US and China.

US treasury secretary Steven Mnuchin said on Sunday that TikTok must be sold off or banned due to national security issues.

The hit social media app “cannot exist as it does”, Mnuchin said on Sunday.

Mnuchin chairs the Committee on Foreign Investment in the United States (CFIUS), which is reviewing TikTok.

‘Enough’

“I will say publicly that the entire committee agrees that TikTok cannot stay in the current format because it risks sending back information on 100 million Americans,” he said on Sunday in an interview with US broadcaster ABC.

Secretary of state Mike Pompeo told Fox News on Sunday that US president Donald Trump “has said ‘enough’” and is preparing to take action.

“He will take action in the coming days with respect to a broad array of national security risks that are presented by software connected to the Chinese Communist Party,” Pompeo said.

ByteDance had been looking to divest its stake in TikTok’s US version, but would prefer an independent spin-off to a Microsoft sale, according to sources cited by the South China Morning Post.

Late on Friday, Trump told reporters he was planning to ban TikTok from the US.

TikTok ‘ban’

“As far as TikTok is concerned, we’re banning them from the United States,” Trump told reporters aboard Air Force One on a flight from Florida to Washington, D.C.

On Saturday the White House said in a statement: “The administration has very serious national security concerns over TikTok. We continue to evaluate future policy.”

ByteDance has made significant concessions to try to win government support that would allow the app to be sold or spun off, including creating thousands of jobs over three years, the Journal reported.

The Financial Times reported that some ByteDance executives believe Trump’s threats are a negotiating ploy to help get Microsoft a better deal.

Microsoft is reportedly one of several companies that have conducted exploratory talks into buying TikTok.

The company already owns social network LinkedIn, but would be likely to face lower regulatory hurdles than social media-focused competitors such as Facebook.

Antitrust review

“We are here for the long run. Continue to share your voice here and let’s stand for TikTok,” TikTok US general manager Vanessa Pappas said in TikTok video published on Saturday.

The company declined to comment further, but said in a statement on Sunday: “While we do not comment on rumours or speculation, we are confident in the long-term success of TikTok.”

The company also reaffirmed its commitment to protecting users’ privacy and safety.

In July the US Senate Committee on Homeland Security and Governmental Affairs unanimously passed a bill banning US federal employees from using TikTok on government-issued devices, which is to be taken up by the full Senate for a vote.  The House of Representatives has also voted for a similar measure.

ByteDance bought Shanghai-based Musical.ly in 2017 and used it as the basis for TikTok, which became the first Chinese social media app to become broadly popular in the US.

The CFIUS began a review into the Musical.ly purchase in 2019 and can recommend the president to block or reverse transactions.

Facebook, Apple, Amazon and Google would also have been likely suitors for TikTok, but all are currently under antitrust scrutiny, making a deal more complex.

‘Crown jewel’

Dan Ives, an analyst at Wedbush Securities, said in a research note on Friday said buying TikTok would give Microsoft “a crown jewel on the consumer social media front”.

Microsoft has little focus on TikTok’s younger user base, outside of its Xbox division and Minecraft, the best-selling video game of all time, which it purchased in 2014.

While a sell-off would remove ByteDance from the US-China political war, it could also be complicated logistically, since the company’s engineers typically work across TikTok worldwide as well as on other ByteDance properties.

US senator Marco Rubio said last week that the country should be more proactive on protecting citizens’ data from foreign-owned firms.

“Moving forward, we must establish a framework of standards that must be met before a high-risk, foreign-based app is allowed to operate on American telecommunications networks and devices,” Rubio said in a statement.

Matthew Broersma

Matt Broersma is a long standing tech freelance, who has worked for Ziff-Davis, ZDnet and other leading publications

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