CEO Satya Nadella spoke with President Trump, pledging to secure U.S. data.

Jeffrey Schwartz

August 3, 2020

5 Min Read
TikTok App

Microsoft confirmed on Sunday that it is considering the purchase of popular social media site TikTok in the United States. This comes as President Trump considers a Tiktok ban in the U.S.

In a statement issued on Microsoft’s corporate blog, the company said it will continue discussions with TikTok’s parent, ByteDance.

Reports of the negotiations surfaced Friday, when President Donald Trump said he might ban TIkTok in the U.S. After Microsoft CEO Satya Nadella spoke with Trump about the company’s intentions, the administration has reportedly blessed a possible deal.

Microsoft didn’t specify why it has interest in the social media site or how much it might pay for TikTok. Also, not evident is to what extent, if any, TikTok would impact Microsoft’s commercial and enterprise businesses and its partners.

Perhaps Microsoft is interested in TikTok for its gaming business, along the lines of its acquisition of Minecraft in 2014. Further, TikTok has unique and sophisticated algorithms that Microsoft might see having potential beyond just running the social media site.

Ballmer Weighs In

Former Microsoft CEO Steve Ballmer told CNBC Monday that TikTok could be an attractive opportunity for the right price. Ballmer, who is Microsoft’s largest shareholder, said he has no inside knowledge about the talks.

Read more about how the TikTok app gathers customer data.


Steve Ballmer

“It’s important to remember, you have to keep trying new things in order to build new businesses,” Ballmer said. ”Microsoft’s legacy actually is in the consumer business and built in enterprise business. And I think it [could become] an important addition to Microsoft’s business model from a revenue perspective.”

While it is not unheard of, it is rare for Microsoft, or any large company, to confirm rumored deals. But given the president’s harsh tone about TikTok, perhaps Microsoft was looking to assuage concerns and prevent a ban. The company may have reached out to gauge what regulatory hurdles a deal might face and to put forth its case.

Because TikTok is based in China, Trump threatened the ban amid the two countries’ ongoing trade dispute. The U.S. has also cited evidence of companies in China gathering data and sharing information with its government. Amid those concerns, Trump had threatened to either issue an executive order or invoke emergency powers.

At least for now, it appears Nadella has persuaded Trump to hold off on banning the social media site.

“Microsoft fully appreciates the importance of addressing the president’s concerns,” according to the company. “It is committed to acquiring TikTok, subject to a complete security review and providing proper economic benefits to the United States, including the United States Treasury.”

Security Risks Overblown?

According to TikTok, the security concerns are moot. The company stores U.S. data is stored in U.S. data centers, TikTok told NBC News. The company added that customer privacy is paramount. Microsoft said it would transfer all private data of TikTok’s American users to U.S. data centers, where it would remain.

“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 company said. “This new structure would build on the experience TikTok users currently love, while adding world-class security, privacy and digital safety protections. The operating model for the service would be built to ensure transparency to users as well as appropriate security oversight by governments in these countries.”

During its negotiations, Microsoft said it will keep …

… the U.S. government, and specifically the President, in the loop. In addition to the U.S., the discussions include Microsoft potentially buying the service in Canada, Australia and New Zealand. Microsoft said it wants to own and operate the social media site in those markets. The software giant also isn’t ruling out the potential of inviting additional investors to participate as minority shareholders.

Microsoft emphasized that the discussions are preliminary, noting there is no certainty that the talks will result in a deal. But it does not appear the discussions will drag on. Microsoft said it will decide by Sept. 15 whether it will pursue a deal. Even then, there always remains the potential for other suitors to emerge.

Potential Headwinds to Gaining U.S. Approval

Despite Nadella’s conversation with Trump, some administration officials reportedly are wary of TikTok, including White House trade adviser Peter Navarro.

“Every time you sign up for TikTok, all your information is potentially going right back to the Chinese Communist Party,” Navarro told Fox News. “The Chinese military and the Chinese government, they can use this social these social media apps to steal your personal information, your business information and also the judge.”

CNBC’s Carl Quintanilla noted that Microsoft is perhaps the strongest candidate to win the administration’s trust. In addition to helping operate much of the government’s cloud infrastructure, the feds recently awarded Microsoft the Defense Department’s JEDI contract. The 10-year contract is now under review following a protest by losing bidder Amazon.

Ballmer noted that the government is going to scrutinize any acquisition of a company with foreign interests.

“Even on the enterprise business, there’s always issues of national sovereignty,” Ballmer said. “Where do you share and where do you store data and the like? This would be a continuation of the theme. And I think Microsoft’s got a real sophistication about that, born [with a] track record of having to work with governments, and understanding the government is part of the fabric.”

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About the Author(s)

Jeffrey Schwartz

Jeffrey Schwartz has covered the IT industry for nearly three decades, most recently as editor-in-chief of Redmond magazine and executive editor of Redmond Channel Partner. Prior to that, he held various editing and writing roles at CommunicationsWeek, InternetWeek and VARBusiness (now CRN) magazines, among other publications.

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