In an official statement, Oracle said that it has submitted its proposal to the Treasury Department to run TikTok’s U.S. operations while taking into consideration the national security concerns raised by Washington.
By Bhushan Akolkar
Updated
3 mins read
On Monday, September 14, software computing giant Oracle Corporation (NYSE: ORCL) confirmed that it has struck a deal with TikTok parent company ByteDance. This news comes after Microsoft Corporation (NASDAQ: MSFT) faced rejection despite being the first to participate in the entire process.
If the deal proceeds, then TikTok will be Oracle’s big-ticket for entry in the world of social media. TikTok is a wildly popular short-video sharing app with over 100 million monthly active users in the United States. In August 2020, the Trump administration issued an executive order banning TikTok operations in the country. The government cited reasons for national data security over TikTok’s alleged association with the Chinese Communist Party (CCP).
Oracle has been the forerunner in the bid for TikTok’s U.S. operations along with Microsoft. In an official press release on Monday, the computing giant wrote:
“Oracle confirms Secretary Mnuchin’s statement that it is part of the proposal submitted by ByteDance to the Treasury Department over the weekend in which Oracle will serve as the trusted technology provider. Oracle has a 40-year track record providing secure, highly performant technology solutions”.
Treasury Secretary Steven Mnuchin said that the government is yet to review this deal. He added that they will be making sure that the technology is safe for the users in the United States. Speaking to CNBC, the Treasury Secretary said:
“I will just say from our standpoint, we’ll need to make sure that the code is, one, secure, Americans’ data is secure, that the phones are secure and we’ll be looking to have discussions with Oracle over the next few days with our technical teams.”
Note that the proposal from Oracle doesn’t include a complete buyout of TikTok U.S. operations. Microsoft and Walmart Inc (NYSE: WMT) had previously applied for a complete buyout of TikTok’s U.S. operations which was rejected by ByteDance. Besides, Beijing had warned that it will block the technology from being exported.
Thus, it looks like TikTok’s deal will be more of a partnership with TikTok for running its U.S. operations. If the deal proceeds, it will also provide a major boost to Oracle’s cloud business. Currently, a majority of TikTok U.S. operations happen through the Google Cloud servers.
Wedbush Securities analyst Daniel Ives said that he doesn’t expect any major changes for the consumers. Speaking to USA Today, Ives said:
“TikTok’s back was against the wall. No company is going to buy the company outright without the algorithm. The alternative was a partnership, and for Oracle, it’s about controlling the inflows and the outflows, making sure there are no backdoors to Beijing and the U.S. government having comfort with Oracle as a trusted vendor and stalwart U.S. technology provider.”
Well, one must also note that TikTok is very short of time. The Trump administration has set a deadline of September 20 for the deal to happen. Thus, there’s every possibility that it can go either way. However, it’s also a known fact that Oracle has good ties with the Trump administration. Considering TikTok’s massive valuations at $75 billion, this will also be a new feather to Oracle’s hat in expanding its operations.
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Bhushan is a FinTech enthusiast and holds a good flair in understanding financial markets. His interest in economics and finance draw his attention towards the new emerging Blockchain Technology and Cryptocurrency markets. He is continuously in a learning process and keeps himself motivated by sharing his acquired knowledge. In free time he reads thriller fictions novels and sometimes explore his culinary skills.
