Oracle beats Microsoft over TikTok US operations

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Oracle Corp. edged out rival Microsoft Corp. during negotiations this weekend for TikTok’s U.S. operations, closing in on a deal for the Chinese-owned music video app that could thwart a threat from President Donald Trump to shut it down. down.An agreement between the owner of TikTok ByteDance Ltd. and Oracle will look more like a corporate restructuring than the outright sale offered by Microsoft, although it is likely to include a stake in a newly-formed U.S. company, according to a person familiar with the negotiations who asked. not to be identified because the information is not public.

Terms discussed with Oracle are still evolving, said a person familiar with the discussions. One option under consideration is that Oracle could take a stake in a newly formed US company while serving as TikTok’s US technology partner and hosting the video application data on Oracle’s cloud servers. The two sides’ early offers valued U.S. activity at around $ 25 billion, but that was before Chinese officials stepped in with new rules placing limits on technology exports, people familiar with the matter said.

In a statement Monday morning, Oracle confirmed “this is part of the proposal submitted by ByteDance to the Treasury Department this weekend. ”

Oracle shares gained 6.5% as of 10:29 a.m. Monday in New York.

The sale of TikTok – forced by a Trump administration ban on national security grounds – is one of the issues at the heart of the shabby Washington-Beijing relationship. Any deal always requires approval from both sides. At the start of the talks, Trump had expressed support for an Oracle offer, calling it a “big company” and co-founder Larry Ellison “a great guy.” Ellison is also one of the few Silicon Valley tycoons to openly support Trump.

Microsoft, which worked with Walmart Inc., had been seen as the likely winner, but discussions have cooled in recent days, one person said. Microsoft has not been asked to revise its initial offer amid recent signs of opposition to a deal from Chinese government officials, the person added.

US Treasury Secretary Steven Mnuchin on Monday confirmed that the administration had received a proposal from TikTok that includes Oracle as the app’s “trusted technology partner”. He said he would review the proposal this week and make a recommendation to Trump, reiterating that a deadline to reach a deal remains September 20.

“We need to make sure the code is, a, secure, that Americans’ data is secure, the phones are secure, and we will be looking to have discussions with Oracle over the next few days with our technical team,” Mnuchin said. at CNBC. , adding that he had great confidence in Microsoft and Oracle. Oracle’s proposal contains a commitment to make TikTok Global a US-based company with 20,000 new jobs, Mnuchin said.

Accepting the deal as a corporate overhaul could help gain approval in Beijing. This could allay fears over TikTok’s cache of sensitive US data while addressing Chinese concerns over the export of key artificial intelligence technologies, said Yik Chan Chin, who studies global media and communications policy at the United States. ‘Xi’an Jiaotong-Liverpool University in Suzhou.

“If you say this is a hostile takeover, it may not be pleasant for both parties,” she said. “But if you present it as a restructuring or a fallout,” that’s more acceptable to both governments.

The Chinese government on Monday declined to comment on the prospect of a merger between ByteDance and Oracle.

“China has spoken about its position on TikTok several times. The United States is now surrounding TikTok. This is a transaction typically forced by the government, ”Foreign Ministry spokesman Wang Wenbin said at a briefing in Beijing.

Progress in talks with Oracle sparked celebrations among young TikTok devotees.

“TikTok has sold out, guys, that means we’re not going anywhere,” @ElianaGhen, who has 2.4 million subscribers, said in a video touting the Oracle deal. “The best birthday present ever, TikTok is here to stay! Said @mrsscott_teaches, who has 22,000 followers.

The app, which allows people to record and edit short video clips ranging from mild lip-syncing to more serious political statements, gained popularity during the global pandemic that has kept many people locked in the interior. TikTok loyalists, who number more than 100 million people in the United States, explain the keen interest of early contenders, from Microsoft to private equity giants like Sequoia and General Atlantic.

Walmart remains interested in making a TikTok investment alongside a consortium of investors led by Oracle. A spokesperson for the retailer said on Sunday it is “continuing discussions with ByteDance management and other interested parties. We know that any approved deal must address all regulatory and national security concerns. ”

The corporate restructuring rhetoric points to ByteDance’s initial intentions earlier this summer to sell a partial stake in TikTok’s operations or restructure the company with a global headquarters and board outside of China. . These aspirations have been complicated by threats from Trump to ban the app and subsequent executive orders, which bar Americans and companies from doing business with TikTok.

If the Chinese company is able to strike a deal through the White House that doesn’t involve an outright forced sale, that would be a major feat for ByteDance founder Zhang Yiming, who has been reluctant to divest an asset. also valuable. Yet critics still wondered how a technology partnership with Oracle, rather than an outright sale, would allay the White House’s national security concerns.

“An agreement where Oracle supports hosting without source code and significant operational changes would not address any of the legitimate concerns about TikTok, and the White House’s acceptance of such an agreement would demonstrate that this exercise was pure fraud.” Alex Stamos, former security chief responsible for Facebook, said in a message on Twitter.

Beijing’s position is another big question mark. Shortly after Microsoft and Oracle’s bid was submitted, the Chinese government announced its right to be closely involved in approving any deal as well as its opposition to the export of key algorithms, such as a recommendation engine that underpins TikTok. ByteDance seemed keen on a more limited type of deal than Microsoft wanted, where it would retain more control, said one of those familiar with the negotiations.

Some U.S. officials would prefer to shut down TikTok’s U.S. operations if a sale does not meet their American demands for the company and associated data.

“ByteDance let us know today that they will not be selling TikTok’s US operations to Microsoft,” Redmond, Washington-based Microsoft said on Sunday. “We are confident that our proposal would have been good for TikTok users, while protecting national security interests.”

Microsoft representatives declined to comment beyond the statement. Representatives for TikTok declined to comment. The White House also did not respond to a request for comment.

Microsoft was the forerunner of the acquisition, having started talks with ByteDance weeks before Trump’s executive orders and believed it had the preliminary framework for a deal the U.S. government could support.

Then Oracle, a company closely linked to the US president, became a bidder with the backing of Sequoia Capital, a key shareholder of ByteDance.

For the enterprise software giant, TikTok is a less obvious solution, but may make sense in light of the company’s desire to grow its cloud computing and consumer data business. Oracle creates profiles of ordinary people and sells them to companies looking to reach specific audiences. TikTok currently stores huge amounts of data and is a major client of cloud services managed by Amazon Web Services and Alphabet Inc.’s Google.

“Oracle’s potential victory in the TikTok saga could give its cloud infrastructure services a little boost, as the software company seeks to become a credible player in a market dominated by Amazon and Microsoft. However, Oracle still has a long way to go before it even becomes one of the top five players in space, given its late entry.

Anurag Rana, Senior Technical Analyst, Bloomberg Intelligence.

Oracle had a relationship with Trump prior to the start of his administration. In 2016, Chief Executive Officer Safra Catz was part of the President’s Transition Team and two years later dined with him at the White House, where she complained about a government contract she deemed unfair, Bloomberg reported.

Vice President Mike Pence visited Oracle’s headquarters in Redwood City, California. Catz has contributed more than $ 125,000 this year to support Trump’s re-election, according to data from the Federal Election Commission. And Ellison let Trump use one of his California estates to host a fundraiser in February.

In recent weeks, the US president had publicly approved Oracle’s offer and called Ellison a “great guy.” Trump’s economic adviser Peter Navarro, who had previously opposed a potential sale to Microsoft and at one point advocated a complete ban on TikTok, echoed the approval in an August appearance on Fox News.

“If you look at Microsoft versus Oracle, the only thing that separates the two companies when it comes to national security is that Microsoft has a strong presence in China,” Navarro said. “Oracle, on the other hand, has a solid reputation for really putting a great firewall between its operations and China and that’s an important thing.

– With help from Jennifer Jacobs, Pavel Alpeyev, Justin Sink, Kurt Wagner, Katie Roof, Matthew Boyle, Nico Grant and Colum Murphy.



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