September 15, 2020
Although Microsoft and Walmart’s joint bid was considered the leader to become the “trusted partner” of the U.S. operations of ByteDance’s social video app TikTok, cloud and platform services company Oracle has come out on top. The structure of the Oracle deal is still unknown, but one source said it will not be an “outright sale.” The White House and the Committee on Foreign Investment in the United States (CFIUS) still have to approve the proposal. President Trump stated he would ban TikTok if it isn’t sold by September 20. TikTok has about 100 million monthly users in the U.S.
The Wall Street Journal reports that, “the app’s global user base … [is] about 689 million, though the app still loses money.” ByteDance investors General Atlantic and Sequoia Capital “spurred on” Oracle’s bid for TikTok, although “it couldn’t be determined late Sunday whether those firms are participating in the final Oracle bid.”
The New York Times reports that, although ByteDance stated Oracle would be its technology partner, it’s not clear whether “that meant it would also take a majority ownership stake of the app.”
Microsoft had stated that the only way to keep TikTok users’ privacy safe was to “take over the computer source code underlying the app.” When China changed its regulations, that possibility was off the table, most likely dooming that deal. Oracle hasn’t said anything about TikTok’s technology, which Secretary of State Mike Pompeo has stated is “answerable to Chinese intelligence agencies.”
NYT adds that, “even if Oracle may try to close a deal, it is unclear whether Beijing would create new obstacles to the process.” Oracle co-founder Larry Ellison, however, has close ties with the Trump administration.
Meanwhile, sources have indicated that the Oracle deal would not include a payment to the U.S. Treasury. “Days before Trump signed the first of two executive orders on August 6 effectively forcing TikTok to divest its U.S. operations to an American company, the president said the Treasury would get a ‘large percentage’ of any sale price,” notes Business Insider. “Speaking to reporters on August 3, the president was not clear where he thought that money should come from.”
Bloomberg reports that, according to sources, ByteDance plans to “make Singapore its beachhead for the rest of Asia as part of its global expansion,” spending “several billion dollars and add[ing] hundreds of jobs over the next three years in the city-state,” where it will also establish a data center for TikTok and Lark, its enterprise software business. The company currently posts 200+ job openings in Singapore, and already has 400 employees there.
“Singapore is highly attractive to tech firms looking for a hub to address the Southeast Asian markets due to geographic proximity,” said Bloomberg Intelligence analyst Vey-Sern Ling.
ByteDance’s suite of products has 1.5+ billion monthly active users and reportedly generated $3+ billion net profit on $17+ billion revenue in 2019. ByteDance is “leading a consortium that has applied for a digital-bank license from the Monetary Authority of Singapore … [which] will award as many as five such permits to non-banks by December.”
CNBC reports that Treasury Department Secretary Steve Mnuchin stated the U.S. government will review the terms of the Oracle deal this week. “From our standpoint, we’ll need to make sure that the code is, one, secure, Americans’ data is secure, that the phones are secure,” he said. It notes that, “depending on how the deal works out, it could boost Oracle’s cloud business.”
“Serving as a technology provider to TikTok might mean Oracle will offer its cloud infrastructure for the app to use,” CNBC notes. According to Gartner, Oracle “was not among the top five cloud infrastructure providers by revenue in 2019.”
‘You Ain’t Seen Nothing Yet,’ Analyst Says, as TikTok Hits 100 Million Users in Europe, CNBC, 9/15/20
TikTok Relying on Trump to Back Off Original Demand to Sell U.S. Business and Approve Oracle Deal, CNBC, 9/14/20
TikTok Users Rejoice Over Oracle Deal, but Saga With Trump Isn’t Over, CNET, 9/14/20
Oracle Deal With TikTok to Undergo U.S. National Security Review, The Wall Street Journal, 9/14/20
TikTok’s Proposed Deal Seeks to Mollify U.S. and China, The New York Times, 9/14/20
TikTok Owner’s Big Reason to Strike a U.S. Deal: China Is Slowing, The New York Times, 9/14/20