How TikTok’s talks with Microsoft turned into a soap opera

The New York Times

Posted at Aug 26 2020 11:50 AM

SAN FRANCISCO, United States — When Microsoft began talking this summer with popular video app TikTok and its Chinese parent company, ByteDance, no one had any intentions of pursuing a blockbuster deal.

With tensions swirling between the United States and China, along with the complexities of running a social media company, any large acquisition appeared too treacherous to navigate. So Microsoft discussed taking a small stake in TikTok and becoming one of the app’s minority investors, said four people briefed on the conversations.

Even a small deal would be a win-win, the thinking went.

For Microsoft, a minority investment would potentially bring TikTok over to using its Azure cloud computing service, immediately making the app one of Microsoft’s biggest cloud clients, said the people, who declined to be identified because the details are confidential. (TikTok has been using Google’s cloud computing services to power its videos.)

For ByteDance and TikTok, a deal with Microsoft could help propel the valuation of the app’s business outside China to as high as $80 billion, the people said. It would also provide TikTok with the endorsement of a blue-chip American company to mollify the Trump administration, which had called TikTok’s Chinese ties a national security threat.

Yet what started as discussions about a small investment morphed into a big, messy, political soap opera. Pushed by President Donald Trump, who has ordered TikTok’s US operations to be sold or to cease operating, 

ByteDance is now discussing selling parts of TikTok’s global operations to several potential bidders. And with so many groups jumping into the talks to get a piece of any deal, all are trying to drive their own interests and agendas.

Apart from Microsoft, the bidders include Oracle, the enterprise software company, the people with knowledge of the talks said. 

Bankers and investors, some authorized and some simply trying to gin up a deal, have also called Netflix, Twitter and Verizon about buying TikTok, they said, though it is unclear if those companies have a genuine interest in an acquisition. Microsoft, with the deepest resources and a market value of more than $1.6 trillion, still appears the furthest along for now, the people said.

The sale scenarios on the table are head-spinning, the people said, because all of the parties — ByteDance, TikTok, their investors and the bidders — want to get the most out of any deal. The talks have covered everything from selling just TikTok’s North American operations all the way to every part of TikTok, minus ByteDance’s Chinese-only video app Douyin, they said.

A deal price is unclear, though numbers have ranged from $20 billion to $50 billion depending on what parts of TikTok will be sold, the people said. The talks are fluid, and no deal may ultimately be reached.