At the end of last week, it seemed that TikTok’s days in the U.S. were numbered. “As far as TikTok is concerned, we’re banning them from the United States,” President Trump said of the hugely popular social network, which his administration considers a national security risk because of its Chinese ownership.
Microsoft is exploring a takeover bid for TikTok’s American operations, which gained traction thanks to lobbying from some of the president’s top advisers and Republican lawmakers.
Microsoft’s Satya Nadella and President Trump have spoken, and it appears that the phone conversation bought the Microsoft chief time to flesh out the potential acquisition. Microsoft has six weeks to seal a deal for TikTok. Microsoft said it would “move quickly” to pursue a deal with TikTok’s parent, Beijing-based ByteDance, aiming to wrap it up by Sept. 15. Microsoft will conduct “a complete security review” of the company, it said, and pledged to keep all American users’ data within the U.S. and sever any connections to systems abroad.
How much will it cost?
Last week, a group of investors, including Sequoia Capital and General Atlantic, floated a $50 billion bid for TikTok, according to Reuters. Microsoft is interested only in TikTok’s businesses in the U.S., Australia, Canada and New Zealand, and may invite other “American investors” to take minority stakes.
The time pressure, and alternative of a shut down, may give Microsoft the upper hand in negotiations with ByteDance. but the Chinese company does not seem resigned to a forced sale. TikTok has responded to President Trump’s executive order to prohibit US transactions by pledging to “pursue all remedies available to us in order to ensure that the rule of law is not discarded and that our company and our users are treated fairly.” The company alleges lack of due process, and it plans to sue the Trump administration over the ban as soon as today – Tuesday, August 11th 2020.
What is certain is that TikTok’s valuation is many times higher than the $1 billion it cost in 2017 to buy its predecessor, Musical.ly. That doesn’t seem to be a problem for Microsoft because at the end of June, Microsoft had just over $136 billion in cash.
What’s in it for Microsoft?
Taking over TikTok would give the tech giant “control of one of the largest and most influential social networks in the country.
A Microsoft-TikTok company could also create meaningful competition for Facebook and Google, leveraging other Microsoft brands like LinkedIn, Minecraft and Xbox. But, Microsoft’s experience with consumer businesses is mixed, so the successful transistion of TikTok is not assured — think of the search engine Bing or the ill-fated takeover of Nokia’s smartphone business. And in June, Microsoft said it was shutting down Mixer, a video-game-streaming platform, and closing all of its retail stores.
The biggest risk, perhaps, is to the rest of Microsoft. Will the company’s management need to devote so much attention to TikTok and its political issues that it distracts from its very profitable core of serving business customers?
