The owner of TikTok has chosen Oracle over Microsoft as the American tech partner that could help keep the popular video-sharing app running in the U.S., according to a source familiar with the deal who was not authorized to speak publicly about it.
Microsoft announced Sunday that its bid to acquire TikTok’s U.S. operations was rejected, removing the tech giant from the running a week before President Donald Trump promises to follow through with a plan to ban the Chinese-owned app in the U.S. over spying concerns.
TikTok and the White House declined to comment Sunday. Oracle didn’t return a request for comment but has previously declined comment.
Walmart, which had planned to partner with Microsoft on the acquisition, said Sunday it “continues to have an interest in a TikTok investment” and is talking about it with ByteDance and other parties.
The Trump administration has threatened to ban TikTok by Sept. 20 and ordered ByteDance to sell its U.S. business, claiming national-security risks due to its Chinese ownership. The government worries about user data being funneled to Chinese authorities. TikTok denies it is a national-security risk and is suing to stop the administration from the threatened ban.
It’s not clear if the proposed deal will only cover TikTok’s U.S. business, and, if so, how it will be split from the rest of TikTok’s social media platform, which is popular worldwide. ByteDance also owns a similar video app, Douyin, for the Chinese market.
Any deal must still be reviewed by the Committee on Foreign Investment in the United States, known as CFIUS, a U.S. government group chaired by the Treasury Secretary that studies mergers for national-security reasons. The president can approve or deny a transaction recommended by the panel, though Trump has already voiced support for Oracle as a “great company” that could handle the acquisition.
Microsoft said in a Sunday statement that ByteDance “let us know today they would not be selling TikTok’s US operations to Microsoft.”
Microsoft added it was “confident our proposal would have been good for TikTok’s users, while protecting national security interests.” The company said it “would have made significant changes to ensure the service met the highest standards for security, privacy, online safety, and combating disinformation.”
TikTok, which says it has 100 million U.S. users and about 700 million globally, is known for its fun, goofy videos of dancing, lip-syncing, pranks and jokes. It’s recently become home to more political content such as the comedian Sarah Cooper, who drew a large audience by lip-syncing Trump’s own often-disjointed statements from public appearances.
But the app has also raised concerns because of its Chinese ownership. The White House has cracked down on a range of Chinese businesses, including telecom equipment makers Huawei and ZTE and messaging app WeChat, over worries that they would enable Chinese authorities to get U.S. user data. Republican and Democratic lawmakers have raised concerns about censorship and children’s privacy.
TikTok denies that it has shared user data with the Chinese government or that it would do so if asked. The company says it has not censored videos at the request of Chinese authorities and insists it is not a national-security threat.
TikTok has sued to stop the ban, but not the sale order. The negotiations have been complicated by several factors, including Trump’s repeated demands that the U.S. government should get a “cut” of any deal, a stipulation and role for the president that experts say is unprecedented.
In addition, the Chinese government in late August unveiled new regulations that restrict exports of technology, likely including the artificial intelligence system TikTok uses to choose which videos to spool up to its users. That means ByteDance would have to obtain a license from China to export such technology to a foreign company.
The deal had come together rapidly after the administration ramped up its threats against TikTok this summer, despite TikTok’s efforts to put distance between its app and its Chinese ownership. It installed former Disney executive Kevin Mayer as its American CEO, but he resigned in August after just a few months on the job, saying the “political environment has sharply changed.”
Both Microsoft and Oracle are known more for their business software offerings than for those intended for consumers.
Oracle primarily makes database software. It competes with tech giants such as Microsoft and Amazon that provide cloud services as well as business-software specialists like Salesforce.
Some analysts see Oracle’s interest in a consumer business as misguided. Oracle should focus on enterprise-market acquisitions and not invest in a consumer app like TikTok that doesn’t fit with the rest of its business, said Jefferies analyst Brent Thill, who compares the idea to Delta Airlines buying a motorcycle company. “It doesn’t make any sense,” he said.
Thill suggested that TikTok competitors like Facebook and Snapchat should be “cheering on Oracle” as a buyer, because Oracle wouldn’t “add a lot of value to the app.”
Oracle co-founder Larry Ellison is unusual among tech executives for his public support of President Donald Trump, hosting a fundraiser for him in February at his Rancho Mirage, California, estate. The company also hired a former top aide to Vice President Mike Pence; its CEO, Safra Catz, also served on Trump’s transition team.
The president said on Aug. 18 that Oracle was “a great company” that “could handle” buying TikTok. He declined to state his preference between Oracle and Microsoft as buyers.
By MATT O’BRIEN and TALI ARBEL AP Technology Writers.
Microsoft will buy video game maker ZeniMax for $7.5 billion
Microsoft is buying the company behind popular video games The Elder Scrolls, Doom and Fallout.
The software giant said Monday that it is paying $7.5 billion for ZeniMax Media, the parent company of video game publisher Bethesda Softworks.
Microsoft said it is buying Bethesda in part to beef up its Xbox Game Pass game subscription service, which it says has over 15 million subscribers.
Bethesda games, such as Starfield, which is currently in development, will launch on Xbox Game Pass the same day they launch on Xbox or computers, Microsoft said.
Microsoft has new consoles debuting on Nov. 10, the Xbox Series X and stripped down Series S version. It will be competing against Sony’s new PlayStation 5 console.
R.W. Baird analyst Colin Sebastian said the deal is part of a wider industry trend of consolidation. Microsoft already owns studios that make popular games including Minecraft and the Halo franchise.
“We believe the deal checks a lot of boxes for Microsoft, such as strengthening the Xbox/Games division product portfolio as competition increases, boosting the profile of Xbox subscription services, and providing more content for the company’s cloud gaming initiatives,” he wrote in an investor note.
Microsoft Corp., which is based in Redmond, Washington, expects the deal to close in the second half of fiscal 2021.
— REDMOND, Wash. (AP)
Judge agrees to delay US government restrictions on WeChat
In a ruling dated Saturday, Magistrate Judge Laurel Beeler in California said the government’s actions would affect users’ First Amendment rights, as an effective ban on the app would remove their platform for communication.
WeChat is a messaging-focused app popular with many Chinese-speaking Americans that serves as a lifeline to friends, family, customers and business contacts in China. It’s owned by Chinese tech giant Tencent.
The group of WeChat users requested an injunction after the U.S. Commerce Department said Friday it would bar WeChat from U.S. app stores and keep it from accessing essential internet services in the country beginning Sunday at 11:59 p.m.
The Trump administration has targeted WeChat and another Chinese-owned app, TikTok, for national security and data privacy concerns, in the latest flashpoint amid rising tensions between Washington and Beijing. The administration contends that the data of U.S. users collected by the two apps could be shared with the Chinese government.
On Saturday, President Donald Trump said he supported a proposed deal that would have TikTok partner with Oracle and WalMart to form a U.S. company. There is still a chance that TikTok could be banned in the U.S. as of Nov. 12 if the deal isn’t completed, under the restrictions put in place by the Commerce Department.
However, a restriction to bar TikTok from app stores in the U.S., similar to what WeChat faced, was pushed back a week to Sept. 27 after Trump backed the latest TikTok deal.
On Sunday, Secretary of State Mike Pompeo told Fox News that the government will ensure that under the TikTok-Oracle-WalMart deal, no American’s data would end up in the possession of the Chinese government.
In the WeChat case, the users argued that the moves targeting the all-in-one app with instant-messaging, social media and other communication tools would restrict free speech.
In her ruling, Beeler found that a WeChat ban “eliminates all meaningful access to communication in the plaintiffs’ community,” and that an injunction would be in the public’s interest. Furthermore, specific evidence about WeChat posing a national security threat was also “modest,” she wrote.
The U.S. government earlier argued that it would not be restricting free speech because WeChat users still “are free to speak on alternative platforms that do not pose a national security threat.”
The White House did not immediately reply to a request for comment on the injunction, but Kerri Kupec, a spokesperson for the Department of Justice, said the department was reviewing the judge’s order.
The dispute over WeChat and TikTok is the latest attempt by the Trump administration to counter the influence of China. Since taking office in 2017, Trump has waged a trade war with China, blocked mergers involving Chinese companies and stifled the business of Chinese firms like Huawei, a maker of phones and telecom equipment.
NEW YORK (AP)
By STAN CHOE AP Business Writer.
AP technology writer Zen Soo in Hong Kong and reporters Michael Balsamo and Martin Crutsinger in Washington contributed to this report.
Trump backs proposed deal to keep TikTok operating in US
NEW YORK (AP) — President Donald Trump said Saturday he’s given his “blessing” to a proposed deal that would see the popular video-sharing app TikTok partner with Oracle and Walmart and form a U.S. company.
Trump has targeted Chinese-owned TikTok for national security and data privacy concerns in the latest flashpoint in the rising tensions between Washington and Beijing. The president’s support for a deal comes just a day after the Commerce Department announced restrictions that if put in place could eventually make it nearly impossible for TikTok’s legions of younger fans to use the app.
Trump said if completed the deal would create a new company likely to be based in Texas.
“I have given the deal my blessing,” he said. “If they get it done, that’s great. If they don’t, that’s OK too.”
Trump said the new company will be hiring at least 25,000 people and making a $5 billion contribution to a fund dedicated to education for Americans. “That’s their contribution that I’ve been asking for,” he said.
TikTok said Oracle and Walmart could acquire up to a cumulative 20% stake in the new company in a financing round to be held before an initial public offering of stock, which Walmart said could happen within the next year. Oracle’s stake would be 12.5%, and Walmart’s would be 7.5%, the companies said in separate statements.
The deal will make Oracle responsible for hosting all TikTok’s U.S. user data and securing computer systems to ensure U.S. national security requirements are satisfied. Walmart said it will provide its ecommerce, fulfillment, payments and other services to the new company.
“We are pleased that the proposal by TikTok, Oracle, and Walmart will resolve the security concerns of the U.S. administration and settle questions around TikTok’s future in the U.S.,” TikTok said in a statement.
Trump has been demanding that the U.S. operations of TikTok be sold to a U.S. company or else be shut down. He’s also been targeting WeChat, another Chinese-owned app.
The administration contends that the user data collected by the two apps could be shared with the Chinese government. On Saturday, Trump said the U.S.-based TikTok “will have nothing to do with China.” TikTok says it has 100 million U.S. users.
On Friday, the U.S. Commerce Department said it would bar TikTok from U.S. app stores as of late Sunday. Further restrictions that would prevent TikTok from accessing essential internet services in the country would go into effect on Nov. 12. Commerce said Saturday that it will delay the barring of TikTok from U.S. app stores until Sept. 27 at 11:59 p.m.
Commerce is imposing similar restrictions on WeChat, although all of the restrictions on that app are set to go into effect Sunday night at 11:59 p.m.
Earlier Saturday, WeChat users asked a U.S. judge to block the government’s actions, saying they would restrict free speech. WeChat is an all-in-one app with instant-messaging, social media and other communication tools. The U.S. government argued that it is not restricting free speech because WeChat users still “are free to speak on alternative platforms that do not pose a national security threat.”
U.S. Magistrate Judge Laurel Beeler asked lawyers for the government and WeChat users whether the prohibitions would cripple WeChat as soon as the clock ticked from Sunday night into Monday morning without a resolution. An attorney for the government said they would likely lead to a “degradation” of WeChat over time.
Judge Beeler did not rule immediately on the motion.
WeChat has millions of U.S. users who rely on the app to stay in touch and conduct business with people and companies in China and around the world. In court filings, the founder of the Mental Health Association for Chinese Communities, who is a U.S. citizen in California, said that the group’s primary tool to reach out and provide services to Chinese Americans is WeChat.
“Since many of the Chinese community members we serve are not fluent in English, WeChat is the only online tool that they rely on,” Elaine Peng said.
The Trump administration’s aggressive tactics are part of its latest attempt to counter the influence of China, a rising economic superpower. Since taking office in 2017, Trump has waged a trade war with China, blocked mergers involving Chinese companies and stifled the business of Chinese firms like Huawei, a maker of phones and telecom equipment.
China-backed hackers, meanwhile, have been blamed for data breaches of U.S. federal databases and the credit agency Equifax, and the Chinese government strictly limits what U.S. tech companies can do in China.
China’s ministry of commerce condemned the U.S. moves and urged it to stop what it called bullying behavior. It also said China may take “necessary measures” to protect Chinese companies.
The U.S. Treasury Department said Saturday that TikTok’s deal still needs to close with Oracle and Walmart, and it also needs documentation and conditions to be approved by the Committee on Foreign Investment in the United States.
That, of course, also leaves the potential for more roller coasters of emotion for TikTok users, such as Haley Hoffman Smith, a 24-year-old who moved to Manhattan this year to pursue her dream of becoming a talk-show host. She said she had just hit 100,000 followers on TikTok and was crushed on Friday to hear it may be headed for a shutdown.
“TikTok is an inextricable part of my dream chasing story,” she said, “and to lose it forever would not only be an inconvenient setback, but an absolute heartbreak.”
By STAN CHOE AP Business Writer.
AP Business Writers Tali Arbel, Matt O’Brien and Barbara Ortutay contributed.
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