Microsoft has put talks to buy TikTok's US operation on hold following opposition to the deal from US President Trump, according to a Wall Street Journal report citing unnamed sources.
Trump's stance spurred more concessions.
TikTok had already agreed to offload its entire US operation to mollify Trump Administration concerns that the privately-held Chinese company shared information with its government. Previously it had offered Microsoft a minority stake.
Microsoft's mega acquisitions
• 2018; Github; US$7.5 billion
• 2016: LinkedIn, US$26.2 billion
• 2014: Minecraft, US$2.5 billion
• 2013: Nokia, US$7.2 billion
• 2011; Skype, US$8.5 billion
• 2007: aQuantive: US$6 billion
Now, TikTok is said to have offered to create 10,000 jobs in the US over three years. However, it wasn't immediately clear if the gambit would persuade Trump. He may feel burnt. An earlier promise by Chinese tech manufacturer Foxconn to create 13,000 jobs in Wisconsin - touted by the President in 2017 - have yet to eventuate despite the lure of US$4 billion in tax breaks.
The two companies are said to have been caught off-guard by Trump's opposition. The pair had hoped for a deal as soon as Monday US time.
Meanwhile, comments from US secretary of state Mike Pompeo on Sunday suggested that additional action against a wider range of Chinese technology companies would follow.
"These Chinese software companies doing business in the United States, whether it's TikTok or WeChat — there are countless more . . . are feeding data directly to the Chinese Communist party, their national security apparatus," Pompeo told Fox News.
TikTok's Chinese owner, ByteDance, has been under pressure since Trump threatened to ban the short-video app on Friday.
The deal would have been a win for Microsoft, giving it a long-sought foothold in social media (TikTok has around 80 million users in the US and around 1 billion worldwide); a win for the Trump administration, which would avoid a backlash from banning a wildly popular app, and - if the price is anything like the US$26 billion that Microsoft paid for business networking site LinkedIn, it will be a win for ByteDance. The only party losing face would be the Chinese government - in the event that the conspiracy theories are true and the app really is used for snooping.
However, it now seems Trump wants the app gone rather than its US operation under US ownership.
Microsoft CEO Satya Nadella might have to write a very big cheque if the deal ever does go ahead - something that may now need to wait until after November's election.
Reuters reports that a private equity deal earlier this year valued TikTok's worldwide operation at US$140 billion.
But Microsoft is the world's second-largest company by sharemarket value (after Apple with a market cap of $1.6 trillion, and it has US$138 billion in cash).
The Journal says the situation is fluid, but that a deal could be reached as soon as Monday US time.
In January, the Pentagon banned US soldiers and their families from using TikTok.
In a statement posted online this week, TikTok chief executive Kevin Mayer, who was hired away from Walt Disney Co. earlier this year, said the company was committed to transparency in how it collects and shares data.
"TikTok has become the latest target, but we are not the enemy," he said.
However, similar denials have not been enough to stop another Chinese tech company, Huawei, from being banned in the US - with the White House subsequently pressuring allies to follow suit (GCSB Minister Andrew Little says our spy agency's decision to ban Huawei was made independently).
A sale to Microsoft will put Mayer's company in the clear politically, but not necessarily ensure its commercial success.
The US tech giant has a long history of acquisitions. Some, like LinkedIn and Skype have grown post-acquisition. Others, like Nokia's handset business and online ad service aQuantive, wilted.
The threat of a Trump close-down of its US business aside, TikTok's key issue at the moment is Facebook's attempt to raid its top content creators.
On July 20, TikTok announced a US$200m fund to help "eligible" high-rating users make a livelihood.
The move was made in response to Facebook-owned Instagram offering financial incentives to high-ranking TikTok creators in a bid to lure them away.