Microsoft's rescue attempt of TikTok endears old company to new generation

Joanna Estrada
August 5, 2020

US President Donald Trump initially dismissed the idea of selling TikTok's US operations to Microsoft but changed his mind following pressure from some advisers and many in the Republican party because banning TikTok could alienate many young voters, Reuters has reported. A purchase of TikTok would certainly cost Apple more than the $3 billion that the tech giant spent to purchase Beats Audio back in 2014.

He has given ByteDance until mid-September to strike a deal, a tactic that is nearly unheard of.

While CFIUS has never before sought a cut from the proceeds of a divestiture it has ordered, the White House could argue that imposing a fee on Bytedance would deprive it of resources that would otherwise support China's government on technology initiatives that could harm US interests, some of the legal experts added.

In recent years, Microsoft has taken a hands-off approach to integrating new acquisitions, said Mike Vorhaus, chief executive of Vorhaus Advisors, a digital media consulting firm.

The President also reitarated Tuesday that the U.S. Treasury would have to get a cut of the deal, which is an unprecedented demand.

"It is completely unorthodox for a president to propose that the US take a cut of a business deal, especially a deal that he has orchestrated", Carl Tobias, a law professor at the University of Richmond, told The Wall Street Journal.

While the China Daily acknowledged that selling the USA business "might be preferable" to ByteDance, the newspaper compared the process to officially sanctioned theft, a sentiment echoed in other prominent state media including the Communist Party's Global Times newspaper. TikTok has denied any links to Beijing, stressing that all its servers used for the American market are located in the US.

Trump said: "It's probably easier to buy the whole thing than to buy 30pc of it. 'Cause I say how do you do 30pc?"

In a memo to employees, Zhang Yiming reportedly said that it "feels like" the government is going for "a ban or even more", due to the "current macro situation", which presumably refers to Trump's desire to appear dominant over China. Is there a firewall put in place, blocking access to TikTok within the country? Are Apple and Google forced to remove it from their USA stores?

Microsoft did not address a potential price when it confirmed the talks.

The report does note that selling its US operations to Microsoft might be preferable for TikTok's parent company ByteDance. "Without a lease, the tenant has nothing - so they pay what's called key money, or they pay something".

Microsoft and ByteDance have given the US government a notice of intent to explore a preliminary proposal for Microsoft to purchase the TikTok service in the US, Canada, Australia, and New Zealand.

"I did say that if you buy it, whatever the price is that goes to whoever owns it, because I guess it's China essentially, I said a very substantial portion of that price is going to have to come into the Treasury of the United States because we're making it possible for this deal to happen", Mr Trump said. "Regarding fees or anything like that, all that remains to be seen", Kudlow said. During a meeting with tech workers Monday, the president said he will not make a decision on whether to ban the app just yet.

"It is extraordinary behaviour as well because last week we had lawmakers in the United States trying to look at whether tech companies are too big and now we've got Trump trying to make one of them even bigger so it is a really, really weird situation to be in".

Other reports by Click Lancashire

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