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The impossible TikTok deal

Image: Liam Hunter / Protocol
TikTok acquisition

Good morning! Hope you had a nice weekend. I spent mine … inside, constantly refreshing Purple Air hoping things would get better. (They did not get better.)

This Monday, Oracle might be winning the TikTok race without even buying TikTok, Nvidia bought Arm for up to $40 billion, Walmart's getting even further into drone deliveries, Facebook wants you to volunteer at polls this fall, and lots more.

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The Big Story

How to not sell a company

Nothing's ever certain in the TikTok saga, but it looks like Oracle's going to come out the winner. Though it's not clear what, exactly, it's winning.

The outright sale of TikTok has hung in the balance over the last week or so, as the Chinese government has expressed serious concerns about the whole thing.

Then Microsoft said it was no longer negotiating a purchase, in an out-of-the blue announcement on Sunday.

  • Here's the entire statement, which is just so perfectly passive-aggressive: "ByteDance let us know today they would not be selling TikTok's U.S. operations to Microsoft. We are confident our proposal would have been good for TikTok's users, while protecting national security interests. To do this, we would have made significant changes to ensure the service met the highest standards for security, privacy, online safety and combatting disinformation, and we made these principles clear in our August statement. We look forward to seeing how the service evolves in these important areas."
  • I'd also like to take this opportunity to announce that Source Code will not be acquiring TikTok's U.S. operations.

That announcement left Oracle as the obvious — maybe only? – bidder left in the race. And then The Wall Street Journal reported that Oracle wouldn't be buying TikTok either, but could instead be TikTok's "trusted tech partner" in the U.S.

  • What does that mean? Who knows. But given what Oracle's good at, it could mean all of TikTok's U.S. data is stored and managed by Oracle, but that it doesn't effectively run the company.
  • China's state-controlled news outlet CGTN appeared to confirm something like that today, reporting that "ByteDance will not sell TikTok's U.S. operations to Microsoft or Oracle, nor will the company give the source code to any U.S. buyers."

This is precisely what President Trump said he didn't want. At least back in July anyway when Microsoft even used that exact phrase — "trusted technology partner" — to explain the relationship it was pursuing with TikTok. To which Trump said, nuh-uh, you have to acquire everything or you get nothing.

  • What's different now? Well, China's made it clear that "all or nothing" may not be an option, for one. In this particular staredown it looks like the White House blinked first.
  • But also Larry Ellison and Safra Catz have a longstanding close relationship with the White House. Ellison has been one of tech's more vocal Trump fans and fundraisers, and Catz even served on his transition team. So maybe knowing people in high places is still useful.

Again, all this could change in roughly the time it takes you to read this email. But as it stands, Oracle could be a big winner here. It could get what it wants — access to a big company, a big brand and a big cloud contract — without jumping into the pit of content moderation and copyright infringement and child safety and all the other problems TikTok has.

Chips

What buying Arm buys Nvidia

This weekend's other big acquisition news came with less drama but probably a bigger price tag and definitely much bigger importance: Nvidia announced it's buying Arm for a total of up to $40 billion.

  • This isn't quite a done deal. The Financial Times reports that the U.K. government is "minded" to refer the deal to the country's Competition and Markets Authority, partly on national security grounds. That's not too surprising: The U.K.'s handling of Arm, which is based in the country, has become a politically charged issue.
  • But Nvidia CEO Jensen Huang isn't too concerned about regulatory roadblocks. "This combination is very pro-customer, it's incredibly pro-competition," he said in a call with reporters Monday. "The regulators are going to be very supportive of this."
  • So let's assume for now that the deal does go through: What then?

The purchase basically makes Nvidia a soup-to-nuts chip supplier on par with Intel, AMD and few others. Arm has made a huge business out of chip designs, and bringing it in-house will help Nvidia push into markets beyond gaming.

  • AI hardware is Nvidia's main new focus, and it's all over the acquisition announcement. "In the years ahead, trillions of computers running AI will create a new internet-of-things that is thousands of times larger than today's internet-of-people," Huang said in a statement. "Our combination will create a company fabulously positioned for the age of AI."
  • And don't forget the scale of this thing. "We love the business model, we love the reach, and we love the vastness of Arm's ecosystem," Huang told reporters today. "And we finally have the opportunity to take our technology to a lot more customers in a lot more industries."

But will other companies still see Arm as a neutral player, when an increasingly direct competitor owns it? Apple says the App Store treats everyone the same, but Apple Music doesn't pay the 30% commission. Google says search isn't biased, but Yelp feels differently. Owning the middleman always seems like a good business strategy — and it often is — but when its neutrality is the whole point, it can be a dangerous one.

  • That might be particularly true here. A whole host of big tech companies — including Nvidia — have been working on RISC-V, a project designed to build an open-source alternative to Arm.
  • Huang called Arm and RISC-V "two very different things" today, but with the former under Nvidia's control, work on the latter by other companies may become more urgent.

Drones

Walmart casts a wide drone-delivery net

Walmart's relentless tech-forwardness continues: It's now working with Zipline on a drone-delivery pilot to ship "select health and wellness products" to buyers in less than an hour. The catch: You'll have to live near Walmart HQ in Arkansas. Which you probably don't. But still!

  • Remember, Walmart announced a different drone-delivery partner, Flytrex, just last week.
  • This is the company's new strategy: It's partnering all over the place, trying lots of things, rather than trying to go The Full Amazon and own the entire experience itself.
  • Protocol's Mike Murphy wrote about Zipline earlier this year. It's one of the companies pushing the American drone delivery ecosystem, and has been delivering medical supplies all over the world during the pandemic.

Like all the other drone-delivery projects in place right now, this doesn't mean you're going to be ordering dog food via quadcopter anytime soon. (Unless you live in Arkansas, I guess?) But it's yet another sign that drone delivery is reaching Real Thing status, and that the next phase of development and testing might happen in the U.S. rather than overseas.

A MESSAGE FROM PHILIPS

Philips

Stronger care … from more efficient operations

In a defining moment for healthcare, it's even more crucial to deliver patient-centered care efficiently. At Philips, we are committed to providing intelligent, automated workflows that seek to improve patient care. More efficient healthcare means stronger, more resilient healthcare.

Learn more.

People Are Talking

After Facebook said Apple's pro-privacy iOS 14 features will be bad for the world, Adam Mosseri explained a bit more:

  • "It's going to be much, much more problematic for all the small businesses. There are millions of them out there that rely on us to target customers and to reach those customers. Particularly during a pandemic when they're hurting."
  • I'm curious: Do you buy Facebook's pro-small-business arguments? I'm torn. Let me know what you think: david@protocol.com.

Today in Elon Musk Twitter Beefs, here's Musk's take on how much Bill Gates knows about electric vehicles after Gates wrote about the subject last month:

  • "He has no clue."

What makes TikTok special? It's not the features, acting U.S. head Vanessa Pappas said, it's the people:

  • "You can certainly copy a feature, but you can't copy a community. I think that's really hard to replicate."

Facebook is giving employees time off to work election polls, and Mark Zuckerberg outlined other ways it's promoting volunteering:

  • "We will show a message at the top of News Feed to people in the U.S. over the age of 18. We've also offered free ad credits to every state election authority so they can recruit poll workers across our platforms."

Apple changed its app review guidelines for game streaming, and Microsoft is not impressed:

  • "This remains a bad experience for customers. Gamers want to jump directly into a game from their curated catalog within one app just like they do with movies or songs, and not be forced to download over 100 apps to play individual games from the cloud."

Making Moves

Apple's latest event is tomorrow. We'll have a bigger preview in tomorrow's Source Code, but the short version: watches, tablets, services and almost certainly no phones.

TechCrunch Disrupt starts today and runs all week. It's virtual this year, but still a stage for all things startup.

Snowflake, Unity, JFrog and Sumo Logic are all set to go public this week. In all, the FT reported that a dozen IPOs this week will raise a total of $6.8 billion, making for the biggest IPO week in more than a year.

In Other News

  • By selling Arm, SoftBank will have a lot of money to spend. One thing it's reportedly thinking about? Going private. It makes sense, but we'd certainly miss the earnings slides.
  • SoftBank's also pushing Gojek and Grab to merge, the Financial Times reports. Both have seen their valuations plummet amid the pandemic, and a competition-killing merger could help fix that. Meanwhile, Bloomberg reports that Alibaba is in talks to invest $3 billion in Grab, part of which would be spent buying some of Uber's stake in the company.
  • Peter Thiel hosted a dinner with white nationalist Kevin DeAnna, BuzzFeed reports, and emailed him saying he "really enjoyed" the meeting.
  • That suicide video is still spreading on social media. It's now made its way to YouTube, while TechCrunch reports that there are entire accounts on Instagram and Twitter dedicated to uploading the video. A reminder: If you see this snippet of footage, click away.
  • VMware is reportedly cutting remote workers' pay. Moving from Palo Alto to Denver could mean an employee taking an 18% salary cut, apparently, and even a move down to LA could require an 8% cut.
  • Amazon plans to hire 100,000 new workers across the U.S. and Canada. They'll be a mix of full-time and part-time jobs, and sound like they'll mostly be in warehouses — including 100 new "operations buildings" the company said it's opening this month.
  • Get ready to start hearing the term "dynamic workplace." A lot. It's the term of art for the evolution of the open office, and describes a place for working, but not for working your 9-to-5 every day of the week.
  • Fraud prevention startup NS8 is under SEC investigation … for fraud. Its CEO left last week, and the company laid off hundreds of people amid the probe.
  • If your team uses Google Groups, you're going to want to be ready for a big redesign that drops tomorrow. Good news, though: Groups no longer looks like it was designed for Windows ME.

One More Thing

The edit button that wasn't

A few people on Twitter reported an interesting new feature yesterday: If you send a tweet, then quickly delete it and go to re-post, Twitter offers the full text of your old tweet to edit and send again. (It didn't work for me, but it seems to be working for lots of folks.) That's not quite an edit button, more like a do-over button, but it's an interesting idea nonetheless. Yet it turns out it's not real: Twitter told me it's actually a bug, not something the company is testing. To which I say: What is a feature but a really great bug?

A MESSAGE FROM PHILIPS

Philips A MESSAGE FROM PHILIPS

Stronger care … from more efficient operations

In a defining moment for healthcare, it's even more crucial to deliver patient-centered care efficiently. At Philips, we are committed to providing intelligent, automated workflows that seek to improve patient care. More efficient healthcare means stronger, more resilient healthcare.

Learn more.

Today's Source Code was written by David Pierce, with help from Shakeel Hashim. Thoughts, questions, tips? Send them to david@protocol.com, or our tips line, tips@protocol.com. Enjoy your day, see you tomorrow.

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