The word everywhere is that Microsoft may be thinking of acquiring TikTok, a Chinese video-sharing social networking service owned by ByteDance, a Beijing-based Internet technology company.
During a news conference last week, President Trump gave a deadline for TikTok to be sold to an American company, or he said he would shut it down. Trump said that TikTok would stop operating on September 15th unless Microsoft or another company purchased it. Further, Trump suggested in a call over the weekend that the CEO of Microsoft “go ahead” with the app’s acquisition.
On the Official Microsoft Blog, the company says:
Microsoft will move quickly to pursue discussions with TikTok’s parent company, ByteDance, in a matter of weeks, and in any event completing these discussions no later than September 15, 2020. During this process, Microsoft looks forward to continuing dialogue with the United States Government, including with the President.
A big issue with the acquisition will be what all is included in the sale. Experts say that TikTok’s most valuable assets, a dynamic algorithm and a collection of popular creators, may be more difficult acquire than as the company itself.
In addition, some have suggested that Netflix should acquire TikTok if Microsoft can’t come to an agreement.
In fact, Netflix co-Chief Executive Officer Reed Hastings has remarked that he’s focused in on two threats: video games and self-made short-form video. Hastings even specifically mentioned TikTok as a new competitor in the company’s latest quarterly earnings shareholder note.
Details of Microsoft’s Latest SEC Filing
Microsoft’s latest annual report, Form 10-K, filed with the Securities and Exchange Commission, provides some insight as to the company’s direction.
The company’s 10-K also details Microsoft’s revenue into categories associated with its traditional product lines, such as Office, Windows, and Xbox. This shows clearly that Microsoft’s back-end server products and cloud services are performing extremely well. Revenue grew by almost 27% to $41.4 billion in the product category of Server and Cloud Services in the fiscal year ended June 30th.
Office and Cloud Services revenue was the second-fastest growing category (11%) at a total of $35.3 billion in revenue for the year. Also, Windows grew by 9% to $22.3 billion.
Microsoft Active in M&A in its Recently Completed Fiscal Year
Microsoft completed 15 acquisitions for a total of $2.4 billion in its 2020 fiscal year, according to the recent SEC filing. That was a drop from 20 acquisitions for a total of $9 billion its 2019 fiscal year. Last year included the $7.5 billion acquisition of GitHub.
The company’s acquisition in its 2020 fiscal year include the likes of Orions Systems, CyberX, Affirmed Networks, ADRM Software, PromoteIQ, and Softomotive.
The company’s largest acquisition was its $26.2 billion purchase of LinkedIn in late 2016, in Microsoft’s 2017 fiscal year. Last year, LinkedIn’s revenue increased 20%.
Who Makes the List as a Rival to Microsoft?
Microsoft’s official list of rivals continues to expand. The company wrote that its Xbox Live and cloud gaming services face competition from various online gaming ecosystems and game streaming services which include products from Amazon, Apple, Facebook, Google, and Tencent. Microsoft said it also competes with other providers of entertainment services such as Netflix and Hulu.
The company explained in the report that its gaming platform competes with console platforms from Nintendo and Sony, “both of which have a large, established base of customers.” Also, its search business competes with Google “and a wide array of websites, social platforms like Facebook, and portals that provide content and online offerings to end users.”
With this growing list, Microsoft now sees restrictions on marketplaces operated by competitors like Apple’s App Store as a substantial risk to its business.