By Georgia Wells and Aaron Tilley 

Oracle Corp. won the bidding for the U.S. operations of the video-sharing app TikTok, a person familiar with the matter said, beating out Microsoft Corp. in a deal to salvage a social-media service that has been caught in the middle of a geopolitical standoff.

Oracle is set to be announced as TikTok's "trusted tech partner" in the U.S., and the deal is likely not to be structured as an outright sale, the person said.

The next step is for the White House and the Committee on Foreign Investment in the U.S. to approve the deal, the person said, adding that the participants believe it satisfies the concerns around data security that have been previously raised by the U.S. government.

The White House declined to comment on the deal on Sunday.

Microsoft earlier Sunday said it was notified earlier in the day of the decision by TikTok parent ByteDance Ltd.

"We are confident our proposal would have been good for TikTok's users, while protecting national security interests," the company said in a statement. "To do this, we would have made significant changes to ensure the service met the highest standards for security, privacy, online safety, and combatting disinformation, and we made these principles clear in our August statement. We look forward to seeing how the service evolves in these important areas."

The move by Beijing-based ByteDance comes days after the Chinese government threw negotiations into doubt when it issued new export restrictions late last month on the kind of artificial intelligence technology TikTok uses. The algorithms, which determine the videos served to users and are seen as TikTok's secret sauce, were considered part of the deal negotiations up until the Chinese policy change raising questions among the parties involved in negotiations over how to value the social-media business.

President Trump has said repeatedly that he would shut down TikTok in the U.S. if it isn't sold to an American company by Sept. 15, though it isn't clear if that is the operative deadline. In an Aug. 6 executive order, the White House gave ByteDance a 45-day deadline before it would ban the app, which the Trump administration says poses an economic and national-security threat to U.S. interests, if it isn't sold to a U.S. buyer. That gives the parties until Sept. 20 to seal a deal.

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 million, though the app still loses money.

The Trump administration has pushed for a sale, expressing concern that TikTok could pass on data it collects from Americans streaming videos to China's authoritarian government. TikTok has said it hasn't been asked to share data with the Chinese government and wouldn't do so if asked.

The structure of Oracle's deal wasn't immediately known.

The White House's role in bringing the sale about has little, if any, precedent in the annals of American deal making. Despite TikTok's reputation for frivolity, White House officials over the past year have directed increasing scrutiny at what they say are national security risks that the data the app collects could be routed to Chinese authorities.

Deal talks involved some of the biggest names in corporate America. Microsoft was long considered the front-runner after it said in early August that it was in talks with ByteDance over a purchase of TikTok's operations in the U.S. along with those in Australia, Canada and New Zealand. Walmart Inc. later said it had joined with Microsoft.

Oracle's bid was spurred on by General Atlantic and Sequoia Capital, two major investors in TikTok's Chinese parent company, that sought to be part of a deal. It couldn't be determined late Sunday whether those firms are participating in the final Oracle bid.

Chinese-U.S. tensions have derailed other high-profile tech deals. The Trump administration blocked Broadcom Ltd.'s $117 billion hostile bid for Qualcomm Inc. over concerns the deal would weaken the U.S. chip maker and cede market power to China. Months later Chinese antitrust regulators failed to approve Qualcomm's bid to buy Dutch chip maker NXP Semiconductors NV.

But those deals generally didn't gain the widespread attention the TikTok talks garnered with its millions of loyal users worried about the future of the app.

Write to Georgia Wells at Georgia.Wells@wsj.com and Aaron Tilley at aaron.tilley@wsj.com

 

(END) Dow Jones Newswires

September 13, 2020 20:46 ET (00:46 GMT)

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