Microsoft is reportedly seeking to strike a deal with ByteDance, the Chinese owner of viral video app TikTok, to purchase all of its global business, including operations in India and Europe, according to sources cited by The Financial Times.
As TikTok, the globally popular social networking platform that allows users to create and view short-form videos, does not operate in China, a potential deal would not extend to its sister app Douyin.
A source close to Microsoft was cited as dismissing claims that “asset swaps in China” were part of the purported discussions, with another two sources mentioning that the American multinational technology company’s desire to “assuage” the Chinese government while dodging the raging cross fire between Beijing and Washington.
While earlier, on 2 August, Microsoft announced it was in talks with ByteDance to explore “a purchase of the TikTok service in the United States, Canada, Australia, and New Zealand,” the current report comes as the sides are seemingly rushing to meet a mid-September deadline to strike a deal and avert a looming ban of TikTok in the US.
According to the outlet, Microsoft warmed to the option of acquiring global operations of the Chinese video-sharing social networking service due to the cited challenges of separating back-office functions, as well as a desire to allow TikTok users in one country to use the app when travelling to another.
Price is reportedly one of the numerous hurdles to the potential transaction, which may take a variety of forms, writes the outlet.
Already before the negotiations started, ByteDance had reportedly been locked in efforts to disengage TikTok’s technology, separating the data and algorithms between China and the rest of its global operations.
Discussions around the potential deal were likened to “multi-dimensional chess” because of the numerous stakeholders involved, including governments and ByteDance minority shareholders.
Microsoft is believed to have discussed adding a clause allowing a year for “untangling” TikTok from its Chinese parent company, to assuage the US government’s concerns regarding the security of data generated by the app.
As for the timeframe, The Financial Times cites people in the know branding it as challenging, suggesting that separating the software might take between five and eight years.
‘Stigma’ of Chinese Ownership
TikTok’s biggest market is India; Sensor Tower data credits it with over 650 mln downloads.
In late June, the app was banned in the country after the Indian government added it to a blacklist of 59 Chinese mobile apps deemed a threat national security, with a change of ownership potentially able to reverse the situation.
The “stigma of Chinese ownership” dealt TikTok a blow in India amid a volatile situation after Indian soldiers clashed with Chinese forces in a disputed Himalayan border area earlier this year.
The report cites a source as confirming that there was a “deal in the works” with Microsoft for TikTok India; however, if it failed to be secured, ByteDance had the option of selling TikTok India either to foreign investors or Indian buyers, and to subsequently license its technology to the company.
While there has not yet been any official comment on the report from Microsoft, according to sources close to ByteDance cited by FT, discussions between the two sides have not made mention of any countries beyond those named by the US technology firm on Sunday.
US President Donald Trump signed an executive order on Thursday banning any transactions with TikTok’s developer ByteDance Ltd. beginning 45 days after the document’s signing, citing national security risks, in a move echoing similar moves against Shenzhen-based tech giant Huawei and other Chinese firms.
“The spread in the United States of mobile applications developed and owned by companies in the People's Republic of China continues to threaten the national security, foreign policy, and economy of the United States. At this time, action must be taken to address the threat posed by one mobile application, in particular, TikTok,” said the order.
A deadline of 15 September for the application to be bought by US owners was accordingly set, with Trump subsequently pledging to ban the app in the United States.
Washington's allegations have been consistently denied by the Chinese government and the companies that were targeted.