This weekend, Microsoft Corp. (NASDAQ: MSFT) confirmed reports that it’s in talks to acquire TikTok – the popular mobile video app currently owned by Chinese company ByteDance.
At first glance, it seems a bit unusual considering Microsoft has spent years walking back consumer plays like Windows Phone, Groove Music, Xbox Kinect, and most recently, Mixer.
But it sounds like the outcome of those talks may ultimately have less to do with Microsoft and more with politics…
Here’s Why Microsoft Could Be Buying TikTok In the Next 45 Days
TikTok has faced a lot of scrutiny over its ties to China.
In June, India fully banned TikTok over national security concerns that the Chinese government was stealing the smart phone data of Indian citizens to use for their own advantage.
And in July, President Trump considered banning TikTok in the US for similar concerns.
In fact, last Friday Trump declared he will ban TikTok here in the states. Out of TikTok's roughly 800 million users, 100 million are US-based – so that would be a big blow to the up-and-coming social media giant.
On Sunday, Microsoft confirmed its rumored talks to buy TikTok's US operations. Trump is reportedly on board, but with big stipulations.
The President has given Microsoft 45 days to secure a deal with ByteDance.
So by September 15, Microsoft has to prove that it can move American TikTok data to the US and separate TikTok from ByteDance's access (aka, cut China out).
If the acquisition goes through, Microsoft would own and operate TikTok in the US, Canada, Australia, and New Zealand.
For Trump, letting Microsoft buy TikTok is better than upsetting 100 million US TikTokers by banning the app ahead of the November elections.
Keeping TikTok could also mean more jobs. The company tripled its US employees this year. And it plans to hire 10,000 more (mostly in NYC).
What Buying TikTok Means for MSFT Stock
This deal would make a mega cap tech company even bigger.
With a $1.6 trillion market cap, Microsoft is currently the 2nd largest company in the world (Apple Inc. is No. 1 with nearly a $1.9 trillion total valuation).
But Microsoft is one of the few with the know-how and relationships to pull off a highly-regulated acquisition.
It's also one of the only companies rich enough to afford the potentially $50 billion price tag for TikTok.
Besides Xbox and LinkedIn, Microsoft hasn't ventured much into the social world.
But the data Microsoft would collect from TikTok could fuel future projects that help developers create new hardware and software that boost the company’s bottom line.
This deal would also make the US digital ad market more competitive by creating a rival to Facebook Inc. (NASDAQ: FB) and Alphabet Inc. (NASDAQ: GOOGL).
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