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RPT: Microsoft, TikTok still negotiating acquisition deal

Microsoft and TikTok continue to negotiate the acquisition deal as TikTok announced that it will establish new rules in order to help mitigate misinformation and the manipulation of information going into the 2020 elections. Yahoo Finance’s Final Round panel discuss the details.

Video Transcript

- Let's turn our attention now to everything going on in TikTok. This saga continues to develop. And today, reporting from CNBC suggests that a big part of this deal which Microsoft and TikTok's parent company, ByteDance, hope to have hammered out in the next couple of weeks is on all of the code. That would take a full year, Melody Hahm, to transfer from ByteDance over to Microsoft such that all 15 million lines of code that goes into creating the TikTok app would reside with a US company on US servers.

And I think it brings to mind the scope-- like, we're talking this, sure, they could just make a deal. But the scale of the operation on a technical level is certainly been underappreciated, I think to my mind, and probably to the market's mind, as well.

MELODY HAHM: Yeah, and just to bring up another example that's been ongoing when it comes to this potential acquisition is Google and Fitbit, right? And we saw that. Australia and the EU are very heavily investigating the kinds of promises that Google has made in terms of siloing some of the data that it would be getting from the Fitbit acquisition, which is already not fully confirmed. And that's just, you know, sort of an emblematic example of what could be the case with the TikTok-Microsoft tie-up.

I do want to say that I got off the phone with a source familiar with the matter a couple of hours ago, who said that there are at least three or four other large companies that are bidding. They are reasonably credible offers. So kind of to what Dan had mentioned earlier this week, too, this could be a bidding war. We act as though the Microsoft and TikTok is sort of a done deal, that's going to be the partner, regardless of potential coding and software implications here. I think we are actually at a much, perhaps, earlier stage when it comes to the potential negotiations that are coming out of this.

And according to this source, Microsoft is pushing the narrative that it will happen within a couple of weeks in order to seal the deal. But I do imagine that there will be other offers on the table very soon. After this hit, I'm actually going to swing by the TikTok headquarters here-- it's actually 10 minutes away from my home-- just to see if there's any activity, any buzzing around. I don't imagine that to be the case in this pandemic, but who knows what we could see from there.

- I mean, we forget that there is actually people in the world that are still doing shoe leather reporting, Melody Hahm. So very excited to hear about that. We've just been stuck in our apartments here in the Northeast for months on end, forgetting that they are face to face contact that sometimes actually go into this business. And yeah, I think you mentioned that a couple of other bidders, no one who is selling themselves wants to say, here's our only date, but it really-- I mean, just to hear the outline of, again, what it's going to take for those security concerns to be overcome-- the number of engineers that it takes to process that much code in that kind of time.

There are really-- like, I don't actually think Facebook has enough engineers to do that. They've both been hiring security people if you think about where their business has gone. Only Microsoft and probably Alphabet have enough engineers to actually do the work.

MELODY HAHM: And never mind the existing security concerns that the Facebooks and Twitters and YouTubes we've already been talking about for years, right-- whether it's misinformation, whether it's about complete utter disinformation, and the intentional way that people are using these platforms. TikTok is not immune to that, right, just because it's the youth that are on the platform. So we did see TikTok coming out with a new policy outlining rules before the 2020 election.

And that just shows all the existing issues that social media faces are probably hiked in, if not more, on a platform like TikTok. And then you think about even Reels out of Instagram. Of course, we don't know whether to take that entirely seriously yet, especially because Reels, when they actually launch their marketing campaign, all they're doing is featuring TikTok creators, right? They basically poached TikTokers to say, hey, basically do the same thing on Instagram. We'll pay you perhaps 10K more or something like that, and we have a better monetization platform.

So Myles, to your point, never mind the sort of outside issues and Trump getting involved and potentially paying the Treasury-- all of these bigger issues-- TikTok itself as an app, as a platform is already dealing with a lot of issues. So I'm curious to see how those are going to be in the background as a lot of these potential acquisition discussions come to the fray.

- I just wanted to weigh in on the code issue, because I don't think it's that big of a deal. It depends on how many people they take from TikTok who are the actual programmers, but when you have 50 million lines of code, and that doesn't even compare to, for instance, Windows 10-- you don't have any one person with their finger on the pulse that knows every single thing that's going on. You don't have to.

But I'll just give you a funny anecdote from Bill Gates back in the days since Microsoft might be buying this. Bill Gates was a great programmer himself, and he would take on any difficult task that one of his underlings couldn't get through. And his famous quip back in the day was, oh, you want me to do that myself? I'll do it over the weekend and somebody else would get it done.

- Well, and guys, whether or not the code really will take that long to port over, I mean, to Melody's point, the September 15 deadline never made much sense. Or at least, you know, it never appeared to carry much weight. The idea that Trump said, OK, we'll let someone buy it, but it has to be done by September 15. And I think I saw something from TikTok out there saying, we aren't necessarily going to get it done by the end.

And good luck to them. I mean, it's-- it's sort of like the kickback that Trump has said-- the government demands a fee for it. OK, you can say it all you want-- it doesn't mean it's going to happen. But just another final thought here on this is that if it is, you know, a Facebook that makes sense to buy this or if it isn't Microsoft, or if it's one of these companies, the idea that it isn't so simple to just split it off from its parent company, that it's going to require time, and code has to be ported over, engineers have to move over-- that's a reminder of how difficult it would be to split off some of the previously acquired companies from companies like Facebook.

I mean, everyone says, oh yeah, Facebook has so many obvious glaring anti-trust issues-- make it sell off WhatsApp, make it sell off Instagram. Not so simple. They've all been integrated into one company. Now maybe that's not a good excuse, but, you know, it would be very complicated if lawmakers actually go through this and say, you have to get rid of this startup you acquired four years ago.

- Yeah, it's always easier to play fantasy business than it is to play actual business of getting people to go in and actually make all these stuff happen. But such is the world that we live.