By Cara Lombardo and Georgia Wells
Microsoft Corp. has paused negotiations to buy the U.S.
operations of the video-sharing app TikTok after President Trump
said late Friday he opposes the deal, according to people familiar
with the matter.
The president's statements spurred TikTok to make additional
concessions, including agreeing to add as many as 10,000 jobs in
the U.S. over the next three years, but it isn't clear if those
will alter Mr. Trump's stance, one of the people said. The founder
of TikTok parent Bytedance Ltd., Zhang Yiming, also agreed to sell
his stake as part of any deal, the person said.
Mr. Zhang was going to retain a minority stake under the deal
being discussed before Mr. Trump's remarks, the person said.
The software giant was in advanced talks with Bytedance, gaining
momentum toward a deal they believed met the White House goal for
the popular app to get bought by a U.S. company, the people said.
Those plans were interrupted when Mr. Trump told reporters on Air
Force One that he preferred to ban the app and wouldn't support a
sale.
Before Mr. Trump's remarks, the two sides believed the broad
strokes of a deal could be in place by Monday, the people said.
The companies were caught off guard by the president's comments,
said one person familiar with the matter. Another person said the
White House has been involved in the discussions for weeks and made
it clear from the outset that the desired outcome was for TikTok to
be "American owned."
In a statement Saturday, a White House spokesperson said, "The
administration has very serious national security concerns over
TikTok. We continue to evaluate future policy."
The deal talks aren't believed to be dead, and some executives
involved hope that Mr. Trump will change his mind and allow the
deal to proceed, now that the transaction is structured the way he
had requested, one person said.
The two companies are trying to get clarity on where the White
House stands and whether it is planning a separate action that
would make it difficult for TikTok to operate in the U.S., the
people said.
Mr. Trump said that he preferred to ban the app entirely.
"As far as TikTok is concerned we're banning them from the
United States, " he said. "Well, I have that authority."
The mixed signals reflect divisions within the White House about
the appropriate course of action, according to people familiar with
the matter. Treasury Secretary Steven Mnuchin and Secretary of
State Mike Pompeo are believed to favor a sale of TikTok to
Microsoft, the people said.
White House counsel Pat Cipollone and Matthew Pottinger, the
president's deputy national security adviser, have been involved in
trying to broker the deal, White House officials said.
Among the fears is a public backlash if the administration
forces the wildly popular app, known for its dancing and lip-sync
videos, from the phones of millions of teenagers.
At a Friday morning meeting, Treasury officials told the
Committee on Foreign Investment in the U.S. that a Microsoft deal
was imminent, said people familiar with the matter.
Others in the White House, most notably trade adviser Peter
Navarro, have urged Mr. Trump to take a harder line against TikTok,
the people said.
Mr. Navarro didn't respond to requests for comment. He has
previously said he doesn't believe allowing TikTok to be sold to an
American company solves the national-security issues at play.
U.S. officials have expressed concerns that TikTok could pass on
the data it collects from Americans to China's authoritarian
government. TikTok has said it would never do so. Officials also
worry that the app could be used to spread Chinese propaganda and
that t he platform's moderators are censoring content to appease
Beijing. The company has said it is increasingly adapting its
content policies to be tailored to local markets where it operates,
including the U.S., and that Beijing doesn't dictate policies for
those.
The high-stakes haggling threatens to scuttle an ambitious play
from Microsoft to take on Facebook Inc. in social media. The
software giant initially plans to let TikTok operate independently,
one person said, much as it has done with LinkedIn since acquiring
that company for more than $26 billion in 2016.
TikTok says it has 100 million users in the U.S. It isn't yet
profitable, as it has spent heavily to acquire users in recent
years, but internally the company projects it will have $1 billion
in revenue this year and $6 billion next year, said a person
familiar with the matter.
The company currently has about 1,500 employees in the U.S.
A sale to Microsoft, likely for billions of dollars, would be a
win for both TikTok and Bytedance, where executives for months have
feared that the Trump administration will take action that forces
the app out of the U.S.
Mr. Zhang has been closely involved in the talks, said people
familiar with the matter. TikTok CEO Kevin Mayer, who joined the
company in June from Walt Disney Co., hasn't been as central to the
negotiations, the people said.
"I want to say thank you to the millions of Americans who use
TikTok every day," TikTok's U.S. general manager said in a video
the company posted to the platform on Saturday. "We're not planning
on going anywhere."
--Kate O'Keeffe, Michael C. Bender, and Kate Davidson
contributed to this article.
Write to Cara Lombardo at cara.lombardo@wsj.com and Georgia
Wells at Georgia.Wells@wsj.com
(END) Dow Jones Newswires
August 01, 2020 18:25 ET (22:25 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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