The news this morning that the Biden administration has halted the sale of TikTok’s U.S. operations further illustrates the extraordinary nature of the Trump administration’s move to force the divestiture by its parent company, China’s ByteDance, and confirms that Microsoft avoided a political morass and potential distraction when its bid for TikTok fell through last year.
Latest development: The planned sale to a group that includes Oracle and Walmart has been “shelved indefinitely,” the Wall Street Journal reported this morning, citing unnamed sources. President Biden has begun “a broad review of his predecessor’s efforts to address potential security risks from Chinese tech companies,” it adds.
Background: Microsoft’s bid for TikTok fell through in September after the company insisted on acquiring full control of the social video app’s U.S. operations, data, source code and algorithms, declining to settle for a lesser deal that didn’t put those key assets in its hands. Microsoft wanted to expand into social video, but its interest puzzled longtime observers who saw it as a misfit. “You cannot make a case for this, I’m sorry,” said Mary Jo Foley of ZDNet’s All About Microsoft in a recent GeekWire Podcast appearance.
Policy implications: Biden’s decision suggests that he may be taking steps to avoid “decoupling” the U.S. and Chinese economies, said Wedbush analyst Dan Ives in a research note Wednesday morning. ” In his first 100 days the TikTok situation could potentially be a litmus test for Biden’s first move towards ending the US/China Cold Tech War if he possibly eliminates this executive order around TikTok US operations being sold/divested.” He called the move “a bullish sign for the tech sector.”
Big picture: In an interview with Bloomberg TV, airing Wednesday, Microsoft CEO Satya Nadella cited the importance of competition for the overall health of the tech economy, including companies from China, as long as national security concerns are addressed. “There is no God-given right for U.S. tech companies to take for granted that there cannot be other tech powers,” Nadella said. “All of us in the West Coast of the United States need to be more grounded, because sometimes I think we celebrate our own advances far too much.”