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Microsoft (MSFT) is the prime candidate to purchase the social media app TikTok from its Chinese parent company ByteDance. The move would be a much-needed lifeline for the app, putting its operations squarely in the hands of an American company, following threats by the Trump administration to ban the service over allegations that it is a national security threat.
Yet Microsoft, or any other potential suitors, will need to wrap up a deal by Sept. 15, or see TikTok shut down.
For Microsoft, the potential deal would be a game changer that could reinvigorate the company’s image among younger users who may not use Microsoft products thanks to competitors like Google’s (GOOG, GOOGL) Chromebooks and Apple’s (AAPL) iPhone and iPad.
Microsoft wants to “age up with the user base,” Jefferies analyst Brent Thill told Yahoo Finance’s On the Move.
“So if they can get the younger audience today then that’s a vehicle to then sell other solutions.”
Microsoft needs new blood
Microsoft’s successes of late have largely come from its cloud and server business, as well as its productivity suits. The company’s Intelligent Cloud arm, which includes its Azure cloud computing business, pulled in $13.4 billion in fiscal Q4 2020, while its Productivity and Business Processes arm earned $11.8 billion.
But Microsoft’s More Personal Computing business, which includes everything from Windows OEM and commercial products to Xbox and Surface sales is still incredibly important to the company. In Q4, the business was responsible for $12.9 billion of the tech giant’s revenue, proving that while productivity and cloud services are certainly money makers for Microsoft, the company simply can’t afford to lose its consumer business.
Currently, Microsoft’s only inroad into younger consumers’ lives is its gaming products, whether that’s in the form of its Xbox brand or PC games. Apple and Google, meanwhile, find their products in the hands of every young person with a smartphone. What’s more, schools continue to lean into Apple’s iPads and Google’s Chromebooks as low-cost alternatives to Windows-based laptops for in-class assignments.
“Where do they spend their time? They’re on these other platforms playing … games they’re on their iPhone,” Thill said. “These are not Microsoft platforms. And so they have a tremendous opportunity to grow up with this audience.”
Microsoft needs every opportunity to expand its presence among young people to ensure the future survival of its consumer tech business. And grabbing an upstart social media platform with millions of users could be the perfect opportunity.