WASHINGTON – Chinese app owner TikTok rejected an offer from Microsoft on Sunday to take over the company’s U.S. operations, Microsoft said, as time runs out on an executive order from President Trump threatening to ban the popular app at unless its American operations are sold.
Microsoft was seen as the American tech company with the deepest pockets to buy TikTok’s US operations from its parent company, ByteDance, and with the utmost ability to address the national security concerns that led to Trump’s order. The move leaves Oracle – one of the few Silicon Valley companies to publicly ally with Trump ̵
ByteDance indicated that Oracle would be its “technology partner,” but it was unclear whether that meant it would also take a majority stake in the app, according to people involved in the negotiations.
“ByteDance let us know today that they would not sell TikTok’s US operations to Microsoft,” Microsoft said in a statement. “We are confident that our proposal would be positive for TikTok users, protecting the interests of national security.”
ByteDance declined to comment. An Oracle spokesperson did not immediately respond to a request for comment.
Microsoft had he stated in August that he would insist on a series of protections that would essentially give him control of the computer code that TikTok uses for the American and many other English-language versions of the app. A few weeks later, China issued new regulations that essentially prevent TikTok from transferring its technology to a foreign buyer without the explicit permission of the Chinese government.
Chinese regulations helped to wipe out Microsoft’s effort, which said the only way it could protect the privacy of TikTok users in the United States and prevent Beijing from using the app as a place for disinformation was to detecting the computer source code behind the app and the algorithms that determine which videos are viewed by the 100 million Americans who use it each month.
“We would have made significant changes to ensure that the service met the highest standards of security, privacy, online security and the fight against disinformation,” Microsoft said in its statement.
Oracle hasn’t said anything publicly about what it would do with TikTok’s underlying technology, which is written by a team of Chinese engineers in Beijing and which Secretary of State Mike Pompeo has accused is accountable to Chinese intelligence agencies. This is a major concern of US intelligence agencies, led by the National Security Agency and the US Cyber Command, which have warned internally that anyone who checks the computer code could be channeling – or censoring – a range of politically sensitive information. to specific users.
ByteDance and TikTok have denied helping the Chinese government.
TikTok became the latest flashpoint between Washington and Beijing in control of the technology that affects American lives. The Trump administration had already banned the Chinese telecommunications giant Huawei from selling next-generation networks and equipment, or 5G, in the United States, citing the risk that a foreign power controls the infrastructure on which all Internet communications flow.
On August 6, President Trump issued an executive order saying TikTok must essentially conclude a deal to sell its U.S. operations by September 20. He later issued a second executive order giving ByteDance a few weeks later to close a sale.
The moves have taken the US-China battle in new directions. For the first time, the United States has tried to stop a Chinese cultural phenomenon, with an intense following among American teenagers and millennials, which brings with it the possibility of future influence.
Even if Oracle attempts to strike a deal, it is unclear whether Beijing would create new obstacles to the process. And the election year policy has hovered over negotiations from the start. Unlike many other tech companies, Oracle has cultivated close ties with the Trump administration. Its founder, Larry Ellison, hosted a fundraiser for Mr. Trump this year, and its CEO, Safra Catz, was part of the president’s transition team and frequently visited the White House.
Together with Amazon, Oracle sought to win a $ 10 billion contract to operate the Pentagon’s cloud services, one of the most contested technology contracts issued by the Trump administration. In the end Microsoft won it.
Oracle was also ready to provide the administration with a system earlier this year to help with a planned study that would allow for the broad release of the malaria drug hydroxychloroquine for the treatment of Covid-19. While doctors had warned that the drug could have dangerous side effects, Mr. Trump had promoted its possible use to treat coronavirus-infected patients.
Oracle’s relationship with the administration attracted attention. In August, an informant from the Department of Labor said Mr. Trump’s secretary of labor Eugene Scalia intervened in a pay discrimination case involving the company.
In a call to discuss Oracle’s earnings last week, Ms. Catz preemptively told analysts that she and Mr. Ellison would not discuss reports on their offer for TikTok.
The rise of TikTok in the United States has been remarkably rapid; it has only taken off in the last two years. ByteDance, founded in 2012, has raised billions of dollars in funding, valuing it at $ 100 billion, according to PitchBook, which follows private companies. Its investors include Tiger Global Management, KKR, NEA, SoftBank’s Vision Fund and GGV Capital.
In July, as pressure from the US government escalated, ByteDance began discussions with investors to carve out TikTok.
But the deal quickly becomes a free for all with offers from various companies and investment entities around the world and new requests from the US and Chinese governments.
As the deal progressed, two of ByteDance’s biggest supporters, Sequoia Capital and General Atlantic, sought to keep their stakes in its treasured subsidiary by saving TikTok from a ban in the United States. Both companies are represented on the ByteDance board of directors.
In late August, the companies partnered with Oracle to bid against Microsoft. Microsoft, meanwhile, has teamed up with Walmart to make its offer.
David E. Sanger and David McCabe reported from Washington; Erin Griffith reported from San Francisco.