Oracle’s Ellison steps out of character with approach for TikTok

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When Oracle turned to Wall Street earlier this year to raise $ 20 billion in a bond sale, it immediately sparked speculation that Larry Ellison, co-founder and chairman of the company, could be plotting a big acquisition. .

But a purchase of TikTok’s US business – even if it had been in the market at the time – would have been low on virtually any expert’s list.

That hasn’t stopped Mr Ellison from emerging this week as a potential bidder – in league with a group of venture capitalists – for some of the sensation of the Chinese-owned video app. Among the most intriguing aspects of the surprise intervention: It could put Mr. Ellison in a race against time with longtime rival Microsoft to save TikTok’s U.S. operations, which face a forced shutdown by the White House .

“I still think it’s possible to beat Microsoft, believe it or not, to make us a bigger company than Microsoft,” Ellison told the San Francisco Chronicle in 2014. Since then, his nemesis in the software industry has skyrocketed. burgeoning cloud computing market, as Oracle’s fortunes sag. Its turnover last year was only 5% higher than it was eight years ago, leaving Wall Street worried about whether Mr. Ellison, one of the Era-era winners. client-server computing, which began in the 1990s, may be a leader in the cloud.

According to some analysts, this would make any offer for TikTok an opportunistic move driven by Mr. Ellison’s personal whims and political considerations, rather than Oracle’s more pressing strategic needs.

Oracle operates in the guts of large-scale IT systems, selling the databases and business applications that are at the heart of the functioning of large organizations. But it lost ground to Amazon, Microsoft, and Google as business computing moved to the cloud.

Owning a popular social media app would help its cause by bringing a large captive user base to its cloud infrastructure, said Daniel Elman, analyst at Nucleus Research. Oracle could also use “TikTok’s user behavior data to supplement its marketing services,” providing its large companies with valuable insights into millions of consumers, he added.

But those side benefits of a deal wouldn’t make up for Oracle’s complete lack of experience in running consumer businesses, some analysts have warned. When a similar research of consumer data led Marc Benioff, director of Salesforce and former Ellison’s protégé, to try to buy Twitter four years ago, it sparked a storm of protest from shareholders of Salesforce, forcing him to give up on the idea.

“I just don’t think this deal makes sense,” said Brent Thill, analyst at Jefferies. Oracle’s lack of consumer experience would make an acquisition a giveaway to TikTok’s rivals, he said. “Their DNA is the business. The only one who’s hoping Oracle gets it is Facebook. ”

Kevin Walkush of Jensen Investment Management, a shareholder in Oracle, added that the TikTok and Oracle customer bases were “diametrically opposed”, while any cloud computing company that came out of a deal would be a “commodity.” Other than being an American company with the resources to complete an acquisition, there was no logic for Oracle to get involved, he said.

An offer on TikTok would also run counter to typical Mr. Ellison acquisitions. During the first decade of the millennium, it became the most active acquirer in the software industry, buying up competitors and integrating their products with their own, thus reducing costs. But over the past decade, Oracle has had only one big problem: the $ 9.3 billion purchase of cloud-based software company NetSuite, which Mr. Ellison himself helped found. Instead, he invested more than $ 110 billion to buy back his own shares.

“It seems out of place,” said Alex Zukin, analyst at RBC Capital Markets. Mr. Ellison is primarily driven by competitive pricing and the ability to consolidate markets, he said.

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But if the strategic logic is lacking, the forced sale of TikTok operations has created a rare opportunity to acquire a hugely valuable, successful consumer internet business. And with potential buyers like Google and Facebook on the sidelines as politicians try to limit their power, Oracle is one of the few companies that can seize the moment.

The Oracle president has also maintained close ties with the Trump administration, which could pay off as the president seeks an early resolution. “Politically, they are among the [companies] in Washington right now – they’re one of the few who can pull off something like this, ”Elman said.

Mr. Ellison, now Oracle’s technology strategist, and Safra Catz, its chief executive, have been close to Trump’s White House. Ms Catz was a member of the President’s Transition Team in 2016, while Mr Ellison recently hosted a fundraising dinner for the President at one of his homes in California – though he said he did not to have come himself.

Proximity seems to have paid off, at least in terms of access. In April 2018, Ms Catz attended a private dinner with Mr Trump where she allegedly criticized the bidding process for the multibillion-dollar Jedi cloud computing contract for the Pentagon – a process that Oracle appealed to the courts. A year later, as the process reached its final stages, Mr. Trump stepped in, saying “big companies” – including Oracle – had complained.

Oracle also complained bitterly about a case brought by the US Department of Labor, accusing the company of discrimination based on gender and race in its compensation policies. Last month, the government lawyer handling the case learned that she was being reassigned – a decision she is now appealing.

Oracle did not want to say whether he had made any direct representations about the department’s lawyer, but said: “Anyone who has followed the trial has seen firsthand that the DoL case lacks all the evidence. and the bottom. ”

Meanwhile, Oracle is also one of only three companies to have secured more than one seat on the president’s task force to reopen the economy after the coronavirus lockdown – Mr Ellison and Ms Catz secured places .

The proximity could put Oracle in a strong position in the pursuit of TikTok, while a deal would also strengthen Mr. Ellison’s ties with Trump’s White House. But whether that would be enough to satisfy Wall Street, that’s another question.

Video: Trump Sanctions Increase Pressure on TikTok-Microsoft Deal | DC Journal

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