Why Microsoft wants TikTok

Automatic TRANSCRIPT

We start off with the deal that has got wall. Street. Washington, and the World Talking Microsoft dying and acquisition of Tiktok in this comes after president trump threatened to ban the video sharing APP here in the US over security concerns the president then made an about face and gave Microsoft the go ahead to proceed with the deal shares of Microsoft rallying today. Let's get to Josh. Lipton with the very latest Josh. So Melissa President trump also weighing in here. Take a listen to what he had to say today. Would have closed down on September fifteenth unless Microsoft or somebody else's able to buy it and work out a deal inappropriate deal. So the Treasury of the. Really, the Treasury I guess you say of the United, states, gets a lot of money. So, why is Microsoft interested in Tiktok? Well, it's a wildly popular APP with one hundred, million users already here in the US engagement trends are strong and stuff that users already spent over an hour a day on the APP Tales. Patrick at emphasizes too broad reasons why he says this could make strategic sense argues Microsoft is relatively weak in consumer services with the exception of xbox live gaming service. So Co a delicate immediately become a much bigger player in consumer technology second this is a potential moneymaker in delicate monetize that big pool of fans to advertising business that the company well understands but they are. Real risks to Microsoft's history and consumer focused acquisitions is mixed from Nokia's handset business to mixture. It's live streaming service. There's also the question of focus here and Adela has concentrated on the enterprise market analysts say that has served his company very well and kept him out of that Regulatory Spotlight Melissa back to you Josh. Thank you. Josh with the latest on Microsoft tiktok cloud plowed his business that got Microsoft to where it is today. Guy Me. So if you Microsoft goes down this road of buying this business while it seems like it's the hottest property around in social media does that do Microsoft shareholders? Well? Probably Yeah I mean the market today told you absolutely yes and a lot of people say it style drift and could lead them down a bad road but you know what are we talking about in terms of price tag your I haven't seen anywhere from forty to fifty billion dollars. You probably know better than I and it's it's it's basically rounding. For Microsoft Number One and number two, the move into stock more than paid for the deal. So it's hard not to like. This Mike Real question is clearly I missed that day in college when the US Treasury gets investment banking fees on deals that are done between two companies I don't know how I missed it, but clearly, I did what? What? Exactly? How does the US Treasury come into this equation? I guess it's somewhat of rhetorical question but you know this whole thing is fascinating to me on a number of levels. But the answer, your original question I don't think it's negative Microsoft and the market today told you it's positive. I mean the order to divest is one interesting aspect of this whole affair. Then there's I mean when I read it, I immediately thought like brokers fee Harkening to Donald Trump's real estate days I don't know if he thinks he gets twenty per treasury excuse me gets twenty percent or what exactly the Treasury is GonNa get out of this whole thing Karen on one can only imagine. I have no idea. Maybe one has got. To be in this situation. It really is crazy I don't love the precedent at all. I feel like we're just sort of taunting. China to. have some sort of reciprocal response that I would imagine. We really won't like very much. So I I'm. Kind of perplexed by the whole thing and I mean I don't know what the right Fi is a. The whole thing is. That part is so crazy he did. Trump say either to Microsoft or someone else I don't know I mean. Microsoft can compete with anyone in terms of price. I don't know if there is a possibility of someone else, but I get also Microsoft which sort of want to give it a try why not money is free to them practically, I mean they have cash but if they wanted to do with dad, it's practically free to them. So I know the woman Tiktok doesn't make money, but I still think it's interesting for them to do and clearly guy pointed out the stock market or the Microsoft holders. It. bakes. Well there's two things here on the big kind of geopolitical. If you don't think that the global economy is fracturing at least into pieces than you're not paying attention because that's what the deal the precedents of this deal is number two on the Microsoft Front. I personally. Don't understand why Microsoft would want this the only thing that makes sense if they can get it at a discount because bike dances forced to divest it but I'm not sure I mean again Josh. They don't have a great history on the consumer side. I mean I'm sure guy still remembers the Zun I still have one of those that was an abject failure. Don't know what this does for them. I do it. You know you you lose focus. So for me I don't really like it but you know what? I'm not the stock market and the stock market like ten. This is exactly Brian San Love Brandon Guy. This is exactly why Microsoft wants it because they're not here because because everyone else first of all, that could be a buyer of this is is in Washington under the scrutiny of the government in terms of their social platforms or too big. This totally makes sense I mean think about the business that they just told you about in gaming an xbox and even azure and the fact that ninety percent of the market. Cap Probably is enterprise. That's the whole point. That's why you'd be going after this year to me. This is this makes a ton of sense because they're probably the only guys can step in and buy it at least with this type of ability to navigate both Washington navigate the financials and yes, they are getting it at a beaten down valuation. If you're getting this anywhere from I, don't know seven eight to ten times. Where these guys are in terms of revenue, that's Eba dos gives me e extraordinary and I think it's actually been proven to be. We've talked about on this show why facebook is running scared of TIKTOK. So why wouldn't Microsoft running towards talk? It makes a lot of sense I like it. All right. Let's get more on what this deal could mean for. Microsoft let's bring in is jared Weiss fell jared great to speak with you. You also think this deal makes a whole lot of sense. In terms of the synergies across the consumer business think this deal could enhance for Microsoft. I think at the end of the day, the biggest takeaway should be from Microsoft perspective when you have the ability to go ahead and integrate a lot of the capabilities that tic TAC. TIKTOK has you think about the technology stack that TIKTOK has and it's incredibly sophisticated. So you can then leverage that and marry that with some of the internal capabilities that Microsoft already has on Azure with the second largest cloud service provider the on the planet I think the the capabilities are dramatic. Tiktok knows what you. Want before you even know that. So when you the leverage that with the capabilities of absorb, I think it makes a lot of sense and then to the earlier point that was brought up I think that's actually key. If you then have the ability to leverage that and bring it into gaming, bring that into Cortina the digital search engine, bring that into being I think the the possibilities are significant. So it it certainly makes a lot of sense obviously, the stock market rewarded Microsoft today and you've added more than. The top valuation in Microsoft's Market Kaplan. Is. There a risk though that that tiktok is the next snap in that snap has run into user growth issues and monetization issues or is finding a home in Microsoft good to going to sorta bypass that possibility is outcome. It's a fair point, but you almost have a free call option if you're searching. You have the ability to go ahead and acquire the asset potentially on the cheap, and if you think about it, you've got one party Microsoft, which is potentially the only party that's available to acquire something of this size with with with regulatory concerns, and if you've got tiktok on the other side there, obviously desperate from a seller perspective. So valuation short plays part of it, and then strategically if you think about the ability to go ahead and integrate. Integrate technology into the Microsoft Stack statues getting a free look at not only can potentially accelerate growth drivers of his existing business. He then has a free call option on expanding the total addressable market to go ahead and think about competition versus facebook getting snap. It's ever

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