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Trump’s TikTok shakedown

Image: The White House / Protocol
Donald Trump

Good morning! This Tuesday, Trump has an … unusual demand if Microsoft buys TikTok, BlackBerry gets into contact tracing, and Airplane Mode solves everything.

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The Big Story

The government wants a cut of your M&A

Satya Nadella got to add a new threat to his list of potential TikTok deal breakers Tuesday: The president asking for a slice of the sale price.

On Monday morning, it seemed like Microsoft was just trying to buy TikTok, and had until Sept. 15 to make a deal work. Trump had briefly thrown a wrench into discussions when he indicated he didn't want a deal to happen, though later seemed to support it. But then! Trump got out another wrench, and this one's a doozy.

  • Here's what Trump said: "I did say that if you buy it … a very substantial portion of that price is going to have to come into the Treasury of the United States, because we're making it possible for this deal to happen. Right now they don't have any rights, unless we give it to them."
  • Trump compared the relationship to a tenant and landlord — in this case, Microsoft the tenant and the government the landlord — and suggested that "without a lease, the tenant has nothing. So they pay what's called 'key money,' or they pay something."
  • Then he said, "at least having to do with the 30%." Which either means he's conflating the app store tax with … something, or I'm misunderstanding entirely.
  • But basically it comes down to the fact that Trump wants Microsoft to buy TikTok and then pay the government a broker's fee.

Arguably, we're between uncharted territory and total fantasyland at this stage. There's now officially no twist that I wouldn't believe. The U.S government nationalizes TikTok and makes @realdonaldtrump the only user? Larry Ellison, Peter Thiel and Palmer Luckey get together and buy it, and make Jared Kushner CEO? Facebook buys it, shuts it down, and calls it a day?

  • It's like Aaron Levie said: We're now in the middle of the craziest "Billions" episode ever, and it'd seem preposterous if it weren't true.

But there is another possible path here: Microsoft could buy a chunk of TikTok, and other U.S. investors could buy the rest.

  • The Information reported a couple of weeks ago that Sequoia, General Atlantic and others were interested in buying in, but now it'd be without ByteDance keeping any stake at all. So you'd get a fully American version of TikTok, without Microsoft owning it outright.
  • Though it remains to be seen what wrenches Trump might throw at this kind of deal. At this stage, seriously, who knows.

Sept. 15 is 42 days away. There will be more talk, more demands, more kooky ideas about how the government and the economy work between now and then. I'd still bet on a deal getting done one way or another, but you have to wonder when one side or both is just going to get sick of the chaos and walk away.

And, as Protocol's Emily Birnbaum writes, even if the deal does get done, it's hardly the end of Microsoft's government-related headaches. Not even close.

Space

Quantum security. In spaaaaaace.

Mike Murphy writes: The future of secure communications may well be up in the air. Like, way up. Honeywell and the Canadian Space Agency have tasked Loft Orbital, a satellite startup that aims to democratize companies' access to space, with sending devices up to test satellite-based quantum key distribution.

Loft Orbital's thing is essentially Space as a Service, and CEO Pierre-Damien Vaujour said that "flying a quantum key distribution unit is definitely on the more complex end of things" the company does.

  • This particular test is meant to determine whether it's possible to send practically unbreakable secure communications around the globe, but is also a test of what Loft Orbital can provide to customers who may not have had the resources to build and launch satellites of their own.
  • The prototype satellite will receive photons from a laser based on Earth, to which it will then apply the quantum encryption key, and send the key back down to a different ground station. If it works, it could be a big step forward in long-distance quantum communication.

Loft has built its custom platform with standardized connectors that theoretically allow any company to put their technology into space on one of the company's 200-pound, washing-machine sized satellites. Most satellite projects can take about 5 years and around $100 million to develop, Vaujour said, whereas Loft can get something into space in around 9 months for a fraction of the cost. "You can think of Loft as the AWS of space," he said.

Side note: Are these the kinds of things we're going to be hearing now? "The AWS of X," and "the X of space?" They definitely are, aren't they.

Apps

BlackBerry's back in the smartphone game

Shakeel Hashim writes: Last week, Canada released a COVID contact-tracing app in Ontario, with plans to roll it out nationwide. And it did so with the help of Canada's favorite old smartphone giant: home-grown hero BlackBerry.

  • BlackBerry helped do a security audit of the app. "It was quite natural for us to offer our expertise," BlackBerry VP Sarah Tatsis told Protocol, since the company's focused on developing security software since getting out of the smartphone game.

Canada took a "privacy first" approach with its app, Tatsis explained, which underpinned its decision to use the Google-Apple APIs. "This decentralized model, I think, really does account for privacy very well," she said, pointing to the lack of personal information collected and the absence of any GPS features.

  • That will help with adoption, she thinks: "If it's not private, or it's not secure, or people don't trust the solution, they won't download it."

Tatsis' team also looked at what she called the "integrity" of the data. "You want to make sure you're guarding against the ability for, for instance, false information to flood the system," Tatsis explained. A hacker that falsely marked certain IDs as positive test cases could tell people they've been exposed to COVID when they haven't, rendering the whole system useless.

BlackBerry wasn't the only Canadian tech company working on the app: Shopify helped early on to build its framework. But it's particularly poignant for the former smartphone giant to now be helping with an app that's designed to be installed by millions. Tatsis, who's been with the company for 19 years, agreed: "It's kind of neat."

A MESSAGE FROM QUALTRICS

Qualtrics

Qualtrics' Work Different free virtual event, on August 12, will explore how successful organizations like Atlassian, Microsoft, the NBA, and many others are listening to and taking action on the feedback from their customers and employees to create a "new better" for their business. Register now at Qualtrics.com.

People Are Talking

A huge group of powerful CEOs, led by Howard Schultz, urged Congress to do more to help small businesses recover:

  • "This is not a call for bottomless handouts. It is a defining moment to show how capitalism can benefit all Americans, particularly entrepreneurs who have been forced to shutter or reduce the capacity of their businesses through no fault of their own."

Jason Calacanis has a very Silicon Valley plan for the school year:

  • "Looking for the best 4-6th grade teacher in Bay Area who wants a 1-year contract, that will beat whatever they are getting paid, to teach 2-7 students in my back yard. #microschool. If you know this teacher, refer them & we hire them, I will give you a $2k UberEats gift card."

Hermann Hauser, who helped spin out Arm in the first place, said selling it to Nvidia is a terrible idea:

  • "The one saving grace about SoftBank was that it wasn't a chip company, and retained Arm's neutrality. If it becomes part of Nvidia, most of the licensees are competitors of Nvidia, and will of course then look for an alternative to Arm."

Building AI that's "like the real world" isn't good enough, Jigsaw's Yasmin Green said:

  • "It's not enough just to automate human behavior. We need to make sure that what's reflected back to us in algorithms is something that's better than we are."

Making Moves

Facebook leased 730,000 square feet of office space in the Farley Building in New York, part of a real-estate spree that could house more than 12,000 employees. So much for remote-first, I guess?

Tommy Francois is out at Ubisoft. Business Insider reported that Francois, the company's VP of editorial and creative services, was fired after an internal investigation into sexual harassment allegations.

Harsha Jalihal is MongoDB's new people officer. She'll run HR for the company, after stints at Unilever and Cognizant.

Nicole Booth is Notarize's new EVP of public affairs. She comes from Quicken Loans, and has long experience working with the government and tech worlds.

In Other News

  • Google invested $450 million in security company ADT. As part of the deal, Nest products will integrate with ADT services: As Protocol's Janko Roettgers explains, always-on smart speakers could be a big deal for home security.
  • Twitter said it could be fined up to $250 million for data misuse. The FTC alleged that by using phone numbers and email addresses to target ads, Twitter violated a 2011 agreement to stop misleading consumers about how it uses their data.
  • The White House withdrew Mike O'Rielly's nomination to the FCC. Last week, Senator Jim Inhofe said he'd block O'Rielly's reappointment over his support for Ligado Networks' new mobile broadband network. O'Rielly has also disagreed with Trump's proposals about social media regulation.
  • Also: The FCC is taking public comment on the NTIA's Section 230 petition. You've got 45 days to bombard Ajit Pai with your thoughts, so get writing.
  • The FTC is teaming up with New York and California's attorneys general to investigate Amazon, according to Bloomberg, with witness interviews planned for the coming weeks. Time to squirm, Jeff: This kind of collaboration is exactly what happened to Microsoft in the '90s.
  • Snapchat spied an opportunity amid the TikTok mess: It signed deals with a bunch of big music companies to allow users to add songs to their Snaps.
  • Sony reported earnings, and PlayStation was the star of the show. PlayStation Plus now has almost 45 million subscribers, and 74% of PS4 games were bought digitally. Still, games aren't enough to make up for dismal performance in Sony's movie, music and electronics divisions.
  • Elon Musk said a third U.S. gigafactory is likely, following its builds in Austin and Berlin. Expect another wave of intense competition from cities vying for the deal. I hope the statues are even bigger this time.

One More Thing

Airplane Mode is always the answer

There's something comforting about the fact that tech-support advice is always the same, even if you're on board the Crew Dragon spaceship. The craft is controlled in part by iPads, and when Bob Behnken couldn't get an app to load, NASA's best and brightest gave him the only instruction that always works: toggle Airplane Mode. And, as a bonus, AirDrop figured prominently in the solution! That's one small step for a screenshot, one giant leap for simple solutions to dumb tech problems.

A MESSAGE FROM QUALTRICS

Qualtrics

Qualtrics' Work Different free virtual event, on August 12, will explore how successful organizations like Atlassian, Microsoft, the NBA, and many others are listening to and taking action on the feedback from their customers and employees to create a "new better" for their business. Register now at Qualtrics.com.

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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