The software giant was believed to be in “advanced negotiations” with TikTok to buy its US arm, but talks are said to be paused after US president Donald Trump opposed the deal on Friday.
Bytedance is said to have made significant concessions in a last-ditch effort to win support from the White House by agreeing to created as many as “10,000 jobs in the US.”
Trump has been vocal about “banning” TikTok in the US on the grounds of national security fears, after accusing the Chinese video-sharing app of “collecting Americans personal data.”
Voicing his opposition to the deal, Trump told reporters on Air Force One that he “preferred to ban TikTok” all together and wouldn’t support a sale.
Trump’s calls to ban TikTok come at a time of heightened tensions between his administration and the Chinese government over issues including, trade disputes and Beijing's handling of the coronavirus crisis.
Any transaction between the two companies could face regulatory hurdles.
In 2017 ByteDance created a social media hit in the US after it bought Musical.ly Inc. and merged it with TikTok - the first Chinese app to do so.
TikTok saw a spike is users recently due to the coronavirus lockdown, which saw the popular app gain 200 million downloads in the first quarter of 2020.
A sale to Microsoft, which also owns LinkedIn, would help the tech giant create a larger presence on social media — an area dominated currently by rivals such as Facebook.
Acquiring Bytedance would also help Microsoft bolster its advertising business, and could help Bytedance resolve data issues and ease US policy makers’ concerns over Chinese firms operating in America.
Spokespeople for Microsoft and TikTok declined to comment on any potential talks.
According to people close to the matter, broad strokes of a deal is expected to be in place by Monday.