In TikTok sale, Microsoft dodged a bullet - TechCentral

In TikTok sale, Microsoft dodged a bullet

Oracle chairman Larry Ellison

Heartiest of congratulations go to Microsoft. Six weeks after announcing to the world it was in talks to buy TikTok, the American software giant comes out to tell us it didn’t get the gig.

Instead, Oracle looks set to buy the international version of the short-video service from Beijing-based ByteDance, though deal terms are still to be finalised. In missing out, Microsoft CEO Satya Nadella dodges a bullet. Now the gun is aimed directly at Oracle and its chairman, Larry Ellison, a cheerleader for American technology and supporter of President Donald Trump — who fired one of the guns in this bizarre scenario.

What Nadella’s team started out offering around US$25-billion for ended up being a whole lot less than they thought, and will go down in history as one of the most calamitous examples of government interference in corporate history.

Let’s recap.

TikTok went viral around the world as an app popular with lip-syncing kids, but the U.S. government claims it’s a national security threat because the company collects reams of data on American citizens. Recognising those concerns, Microsoft announced in early August it was in talks to buy TikTok, and would let us know the result by 15 September (it subsequently brought Walmart into the deal). Days later, Trump issued an executive order banning any American entity from doing business with ByteDance. That effectively forced the sale of TikTok, with a deadline this week.

Prior approval

Beijing eventually called Trump’s bluff and decided that any sale of Chinese artificial intelligence technology needs to get prior approval. That threw a spanner in the works, because while data is what Washington fears, it’s the technology and algorithms that are truly of value. TikTok had developed its share. Beijing is reported to prefer that the service be shut down entirely than have it carved up in a forced sale.

While Microsoft’s initial interest is a head-scratcher — it’s been moving away from consumer technology for the past decade — the reality of this involuntary divestiture has become clear. TikTok and ByteDance are caught between two governments that maybe aren’t so different after all. That the pawn in this tech Cold War doesn’t make weapons or semiconductors but purveys short videos for adolescents makes the situation even more absurd.

Just weeks ago, there was reportedly a line-up of big names keen to get their hands on this hip new app, which makes Instagram look middle-aged. Oracle figured it should have a shot, perhaps reasoning that the technology and algorithms that TikTok developed are of greater value beyond a library of teenage make-up tutorials.

Microsoft CEO Satya Nadella

But now a deal may go ahead, to a company with no business in consumer technology and most likely without the underlying technologies that helped make TikTok such a phenomenon. Despite Ellison’s backing for Trump, there’s no guarantee the separation of TikTok from ByteDance will be clean enough to pass White House muster. There’s also great uncertainty whether Beijing will let the deal proceed at all.

Welcome to the new era of tech Cold War deal-making: absurd, calamitous and only just beginning. The companies that win in this new world order of cross-border acquisitions will be the those most willing to walk away when things fall apart.  — By Tim Culpan, (c) 2020 Bloomberg LP

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