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As Microsoft mulls buying TikTok operations in four countries, President Trump suggests for a complete purchase. However, with the September 15 deadline, Microsoft has little time to overcome some technical and leadership challenges with the buyout.
Computing giant Microsoft Corporation (NASDAQ: MSFT) has recently shown interest in buying the U.S. operations of short-video application TikTok. TikTok’s parent company ByteDance, based in China, is facing the heat of the Trump administration over data theft issues. Several reports in the past have suggested that ByteDance has its links to the Chine Communist Party (CCP). This Chinese control of the app has also gone well with the U.S. government.
However, TikTok’s sensationalism has grown over the last few years in the U.S. and other parts of the world. During the last week, President had a conversation with Microsoft CEO Satya Nadella over the possible purchase. In a word with the reports, Mr. Presdient said: “I think buying 30% is complicated, and I suggested that he can go ahead, he can try.”
A day before the conversation with the President, CEO Nadella said that Microsoft is looking to buy TikTok operations in the U.S, Australia, Canada, and New Zealand. However, President Trump‘s suggestion for a complete purchase can obviously prove more expensive for Microsoft. Besides, Trump also added that part of the transaction would go to the U.S. Treasury since it is making the deal possible.
“It’s a little bit like the landlord/tenant; without a lease the tenant has nothing, so they pay what’s called ‘key money,’ or they pay something. But the United States should be reimbursed or should be paid a substantial amount of money, because without the United States they don’t have anything, at least having to do with the 30%,” he said.
On Monday, August 3, Microsoft (MSFT) stock jumped 5.62% closing the day at $216. The company valuations currently stand at a whopping $1.64 trillion. As per the last quarterly earnings report, Microsoft holds over $136 billion in cash reserves.
Tough Nut to Crack for Microsoft Before Buying TikTok
Microsoft has nearly over 40 days to get the deal through with the current deadline of September 15, said President Trump. But any partial deal would be challenging and complicated concerning factors like technology, valuation, leadership, privacy, and ownership.
Besides, this deal involves three-way talks between ByteDance, Microsoft and the U.S. government. Experts think that this brings more complex issues to solve in very less time. Considering the nature of the split, TikTok will need to operate under two different to satisfy the U.S. government.
Currently, TikTok functions as a global application. It means Americans can watch videos from content creators around the globe. At the same time, global audiences can also watch content from American creators. But in case Microsoft operates the services in four countries, a few questions arise. What if an American watches videos of European content creator. ByteDance said:
“We will make every attempt to protect the platform’s uniqueness, and hope that users can continue to have an uninterrupted experience”.
Speaking to CNBC, Michael Norris, a research and strategy manager at Shanghai-based consultancy AgencyChina, said:
“The same product operated by different parties in different jurisdictions seems unprecedented. These considerations, including compliant operating models and relevant transfers of technology, infrastructure, and access, will complicate acquisition negotiations.”
Well, it will be interesting to see how Microsoft manages to tackle these challenges ahead in time. After its 2016 LinkedIn acquisition for $27 billion, this will be the second-biggest acquisition move from Microsoft in the last five years. As per the Reuters report, ByteDance has recently valued TikTok at a massive $50 billion.