By Aaron Tilley
The Treasury Department said it would review a deal by Oracle
Corp. for TikTok's U.S. operations aimed at avoiding a ban of the
popular video-sharing app because of its Chinese ownership.
Business software provider Oracle on Monday said it was part of
the proposal submitted by TikTok's Chinese parent ByteDance Ltd. to
the U.S. government in which the American tech company would "serve
as the trusted technology provider." It beat out Microsoft Corp. to
work with TikTok to address Trump administration concerns that the
popular video-sharing app's ownership by a Chinese company posed a
national security risk, people familiar with the situation said
President Trump was pushing for a sale of TikTok's U.S. business
and has said, absent a deal, those operations would be shut
Treasury Secretary Steven Mnuchin on Monday confirmed that his
office received a bid proposal from Oracle for TikTok's operations
over the weekend and said that the Treasury-led Committee on
Foreign Investment in the U.S. would review it this week. "We will
be reviewing that at the Cfius committee this week and then will be
making a recommendation to the president and reviewing it with
him," Mr. Mnuchin said on CNBC. Presidents have the power to
overrule Cfius recommendations to either clear or block a deal.
Details of the Oracle arrangement with TikTok weren't
immediately disclosed, but it is expected to involve moving
TikTok's data on American users to Oracle's cloud-computing
infrastructure and housing that information only in the U.S. Oracle
is joining with some of ByteDance's U.S. investors, and Walmart
Inc., which had been working with Microsoft, suggested late Sunday
that it is considering joining the Oracle group, according to the
For Oracle, the arrangement could give a jolt to the Silicon
Valley stalwart's efforts to transform its staid database business
into a major player in cloud computing -- if the companies can
secure government approval for the plan.
The principal attraction of a TikTok deal is adding a flagship
customer to its cloud, people familiar with the arrangement said.
TikTok is a globally recognized client and comes with a coveted
user base for Chairman Larry Ellison as he seeks to accelerate the
shift of the Redwood City, Calif.-based company he founded into a
force in cloud computing, one of the most dynamic areas of
Oracle currently lags far behind cloud leaders including
Amazon.com Inc. and Microsoft. It mainly provides enterprise
customers software to help run their business.
TikTok has soared to around 100 million monthly users in the
U.S., from about 11 million in early 2018, and they are considered
among the most lucrative in the app's global user base of about 689
Working with TikTok would burnish Oracle's cloud credentials, in
part because the video-heavy nature of the app makes it an
especially demanding user, said Ray Wang, founder of the Silicon
Valley-based advisory firm Constellation Research Inc. "Oracle is
showing it can run the toughest workloads in the public cloud and
that's what it's going after," said Mr. Wang. "Video requires a
stable and massively elastic cloud."
Oracle for decades has worked with the U.S. government,
including the national security establishment, and it is
politically well connected. In its announcement Monday, Oracle said
it "has a 40-year track record providing secure, highly performant
Mr. Ellison, also Oracle's co-founder and largest shareholder,
earlier this year threw a fundraiser at his home for the president.
Chief Executive Safra Catz also worked on the executive committee
for the Trump transition team in 2016 and has donated to his
President Trump in mid-August voiced support for Oracle's
involvement in a TikTok deal. "Well I think Oracle is a great
company and I think its owner is a tremendous guy, a tremendous
person. I think that Oracle would be certainly somebody that could
handle it," the president said when asked about Oracle's potential
If it goes through, the TikTok deal would mark the second time
during the pandemic Oracle has won as a customer one of the biggest
winners from the sheltering-at-home era. Oracle this year became a
cloud provider to Zoom Video Communications Inc., when the
videoconferencing app that has seen use surge needed more capacity
to handle the growth in demand with people working from home and
students learning remotely.
Oracle's effort to gain ground on cloud market share from Amazon
and Microsoft has started to show results. Growth in its cloud
business helped Oracle deliver earnings in the most recent quarter
that beat Wall Street's expectations. Oracle called out the Zoom
business for fueling growth even as overall sales advanced
Soon after landing Zoom as a customer, Oracle also won another
videoconferencing provider, called 8x8 Inc., as a cloud customer.
8x8 said it was able to significantly cut its cloud costs with the
shift and saw improved performance. "It's been a very fruitful
partnership," Mehdi Salour, senior vice president of 8x8's global
networks said in an interview.
In its TikTok pursuit, Oracle joined forces with General
Atlantic, Sequoia Capital and Coatue Management LLC, major
investors in TikTok's Chinese parent company, and all hold seats on
ByteDance's board. The firms urged Oracle to join the bidding for
TikTok, people familiar with the matter have said, to find an
alternative buyer to Microsoft, which was seen as front-runner for
The TikTok deal isn't without risk. The arrangement will be
subjected to a U.S. government national security review, the people
said, and could draw scrutiny in China. Both governments have
disrupted negotiations over TikTok's fate in recent weeks,
including a decision by China late last month to impose export
restrictions on the kind of artificial intelligence algorithms that
Some Trump administration officials and members of Congress have
expressed concerns about allowing the app to continue to operate in
the U.S. as long as it has ties to China.
China's state broadcaster reported on Monday that Beijing-based
ByteDance wouldn't sell TikTok's U.S. operations to Microsoft or
Oracle, citing anonymous sources. The company would also not sell
TikTok's source code to any U.S. buyers, it said.
A person close to the TikTok talks said a deal that doesn't
involve buying the suggestion algorithms that are considered the
app's secret sauce would be hard to sell to U.S. national security
Mr. Ellison and Ms. Catz are also plunging Oracle into a
social-media market that is increasingly contested. Earlier this
month Facebook Inc.'s Instagram launched Reels, its own version of
a TikTok-like short video-feature.
--Liza Lin contributed to this article.
Write to Aaron Tilley at email@example.com
(END) Dow Jones Newswires
September 14, 2020 11:51 ET (15:51 GMT)
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