This week Oracle emerged victorious over Microsoft in the race to strike a deal with TikTok over its US operations.
Sources told Reuters that Microsoft didn't help itself when it upset Zhang Yiming, the CEO of TikTok parent firm ByteDance, when it called TikTok a security risk it could fix.
The sources said Microsoft's offer also wasn't high enough to satisfy investors, and China's signaling that it wouldn't accept an outright sale to a US company pushed Zhang to opt for a restructured partnership with Oracle over selling to Microsoft.
Microsoft may have sabotaged its own bid to acquire TikTok's US operations after accidentally insulting the CEO of TikTok's parent company ByteDance.
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Microsoft, formerly the frontrunner to scoop up TikTok's US operations, this week lost out to tech giant Oracle. ByteDance and Oracle have submitted a proposal to the White House that Oracle should become the app's "trusted tech partner" in the US.
Sources familiar with the negotiations told Reuters that ByteDance CEO Zhang Yiming was upset after Microsoft characterized TikTok as a security risk it could fix when speaking to US lawmakers.
Reuters wrote, citing sources: "In arguing for its bid with the Trump administration and US lawmakers, Microsoft upset Zhang, because it referred to TikTok as a security risk it could fix ..."
Sources also told Reuters Microsoft's bid — which was more than $20 billion — did not satisfy ByteDance's investors. The price plus recent signaling from Beijing that it wouldn't accept a forced sale of TikTok to a US company reportedly sealed Zhang's decision to strike a partnership deal with tech giant Oracle rather than sell outright to Microsoft.
The Trump administration has maintained TikTok poses a national security risk because it is owned by ByteDance, which is a Chinese company.
The US argues this means US user data could be handed over to the Chinese government for spying purposes.
TikTok denies this, saying it would never hand over user data to any government for espionage purposes, and that it couldn't even if it wanted to because its data is stored on US servers and is therefore subject to US law.
China reacted furiously when Trump signed two executive orders in early August trying to force a sale of TikTok's US operations to an American company, with state media calling the move "open robbery."
The Chinese government also successfully threw a spanner into sale negotiations in late August when it announced strict new tech export controls which applied to TikTok's recommendation algorithm.
Microsoft officially announced on Sunday its bid for TikTok US had been rejected.
Oracle's proposed deal falls short of an all-out sale, instead being a partnership where Oracle would manage TikTok's US user data. The proposed deal has now been submitted to the Committee on Foreign Investment in the US (CFIUS) for review.
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