Microsoft Corp (MSFT) said on Sunday that it is prepared to continue negotiations to buy the U.S. operations of the video-sharing app TikTok after talking to President Trump.
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The confirmation comes after earlier media reports that the acquisition talks were halted after Trump said late Friday he opposed the deal. The US president had told reporters on Air Force One that he preferred to ban the app and wouldn’t support a sale.
“Microsoft fully appreciates the importance of addressing the President’s concerns,” Microsoft said in a blog post. “It is committed to acquiring TikTok subject to a complete security review and providing proper economic benefits to the US.”
Following a conversation between Microsoft CEO Satya Nadella and Trump, the tech giant said it will move “quickly” to pursue discussions with TikTok’s parent company, ByteDance, with the aim of completing talks by Sept. 15. During this process, Microsoft will continue the dialogue with the US government, including with the President, the company said.
Furthermore, Microsoft and ByteDance have notified the Committee on Foreign Investment in the US (CFIUS) of their intent to explore a preliminary proposal that would involve a purchase of the TikTok app in the US, Canada, Australia, and New Zealand. As part of a deal, Microsoft may also allow other US investors to participate in the purchase by taking a minority interest.
In a move to calm the White House’s national security concerns, Microsoft said that it would ensure that all private data of TikTok’s American users will be transferred to and remain in the US. With regard to any such data currently stored or backed-up outside the US, the tech giant would ensure that this is deleted from servers outside the country.
“This new structure would build on the experience TikTok users currently love, while adding world-class security, privacy, and digital safety protections,” Microsoft stated. “The operating model for the service would be built to ensure transparency to users as well as appropriate security oversight by governments in these countries.”
TikTok could be the “right partner at the right time” for Microsoft, according to Wedbush analyst Daniel Ives, who reiterated a Buy rating on the stock with a $260 price target.
“Microsoft buying TikTok and these US operations would resolve the security issues with this app and also give Redmond a crown jewel on the consumer social media front at a time that other FAANG peers (Facebook, Alphabet) are under massive regulatory scrutiny with anti-trust concerns swirling and cannot go near the TikTok asset,” Ives wrote in a note to investors. “For Microsoft this would be a big bet on the consumer social media space, which the company has stayed away from over the last decade.”
Ives added that he gives the deal to buy TikTok, valued in the private markets at about $50 billion, a 75%-80% chance of success “given the fluid situation and ByteDance’s back against the wall with Nadella & Co. being the only possible white knight”.
Overall, Wall Street analysts share Ives’ bullish outlook on the stock. The Strong Buy consensus scores 27 Buy ratings versus 3 Hold. With shares up 31% this year, the average price target of $225.88 still implies 10% upside potential over the coming year. (See Microsoft stock analysis on TipRanks)
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