TikTok chooses Oracle as U.S. ‘technology partner’

Oracle emerged late Sunday as the likely victor in wooing shortform video app TikTok as the companies race against the clock to keep the app up and running in an attempt to satisfy the U.S. and Chinese governments.

TikTok chose Oracle as its U.S. “technology partner” Sunday afternoon, according to a person familiar with the talks who spoke on the condition of anonymity to discuss the deal. Terms of the arrangement were vague, but the companies brokered the deal in an attempt to satisfy regulator concerns about TikTok to keep it operating in the United States.

It’s unclear whether the deal will satisfy President Donald Trump. Oracle’s executives have close ties to the president, and the company may be well positioned to meet Trump’s expectations after the president took an active role in raising concerns about TikTok.

TikTok executives believe the deal will take care of worries from the Trump administration and others that its Chinese ownership could open the door for Beijing to obtain U.S. consumer data, according to the person familiar with the talks. The deal probably would involve Oracle, a business software giant best known for selling database technology to corporations to help run their operations, taking a stake in the company.

It’s also unclear whether the Trump administration will approve the deal with Oracle. Trump in August issued an order that would ban the app in the United States, beginning Sept. 20. He followed it with a second order that would essentially require TikTok’s Chinese parent company, ByteDance, to divest from its operations in the United States.

TikTok repeatedly has denied claims by experts that it is a national security threat.

Microsoft and Oracle were bidding for that business, which has surged in popularity, particularly with young users. TikTok had 91.9 million monthly active users in the United States in June, up from 26.7 million in February 2019.

Microsoft said separately Sunday in a blog post that its offer to acquire TikTok’s U.S. operations was rejected. Microsoft was the first to confirm that it was courting TikTok this summer as Trump threatened to ban the app over national security concerns.

“We are confident our proposal would have been good for TikTok’s users, while protecting national security interests,” Microsoft said in its post. “To do this, we would have made significant changes to ensure the service met the highest standards for security, privacy, online safety, and combating disinformation, and we made these principles clear in our August statement.”

Walmart had joined Microsoft’s bid for TikTok.

Oracle and TikTok declined to comment. The White House did not have an immediate comment.

The president said last month that Oracle was “a great company” that “could handle” buying TikTok.”

Oracle’s chief executive, Safra Catz, has dined at the White House with Trump and served on the president’s transition team after his election in 2016. Larry Ellison, Oracle’s co-founder and chairman, hosted a fundraiser for Trump this year.

The TikTok deal has been facing a series of obstacles for more than a month and was thrown another hurdle in recent weeks when the Chinese government got involved, slowing the bidding process. Beijing established export rules that prevent the sale of some artificial-intelligence technology that probably includes TikTok’s personalized recommendation algorithm.

The algorithm is TikTok’s secret sauce, technology that makes the service so popular and addictive to its users. Without it, the company’s value to an acquirer is significantly diminished.

Had Microsoft been able to acquire TikTok’s U.S. business, Stifel, Nicolaus & Co. analyst Brad Reback said, the company was well positioned to leverage its operations to make a deal pay off.

“It’s an extraordinary asset with all sorts of ways to make money,” Reback said.