Or­a­cle and TikTok have a deal. What is it?

San Francisco Chronicle Late Edition - - BUSINESS - By Matt O’Brien and Tali Arbel Matt O’Brien and Tali Arbel are As­so­ci­ated Press writ­ers.

The short­video app TikTok has cho­sen Red­wood City’s Or­a­cle as its cor­po­rate sav­ior to avoid a U.S. ban or­dered by Pres­i­dent Trump. The U.S. gov­ern­ment will re­view the prospec­tive deal.

That much is known. Ev­ery­thing else is con­fu­sion, at least to out­siders. For in­stance:

What does it mean that, as Or­a­cle de­clared, it will be­come a “trusted tech­nol­ogy provider” for TikTok? Is this a joint ven­ture, a ven­dor agree­ment or some­thing else? Or­a­cle is point­edly not re­fer­ring to its deal as a sale or ac­qui­si­tion.

Will Trump ap­prove such an ar­range­ment af­ter hav­ing threat­ened a ban if TikTok re­mains owned by its Chin­abased par­ent ByteDance? Would it an­swer the na­tion­alse­cu­rity con­cerns around po­ten­tial data si­phon­ing, cen­sor­ship and pro­pa­ganda from Bei­jing that Trump raised?

Will the Chi­nese gov­ern­ment go along with it?

Will TikTok get kicked out of the ma­jor app stores af­ter Sept. 20, when Trump’s threat­ened ban was sup­posed to go into effect, threat­en­ing its fu­ture in the U.S.?

“This whole process has been a mess,” said Martin Chorzempa, a re­search fel­low at the Peter­son In­sti­tute for In­ter­na­tional Eco­nom­ics.

Mi­crosoft, an an­nounced TikTok suitor, said Sun­day that its re­jected bid would have pro­tected U.S. na­tional se­cu­rity in­ter­ests by mak­ing “sig­nif­i­cant changes” to en­sure se­cu­rity, pri­vacy, on­line safety, and anti­mis­in­for­ma­tion mea­sures. Or­a­cle’s state­ment Mon­day was more muted, em­pha­siz­ing that it has a “40­year track record pro­vid­ing se­cure, highly per­for­mant tech­nol­ogy so­lu­tions.”

U.S. Trea­sury Sec­re­tary Steven Mnuchin ap­peared to sup­port the Or­a­cle bid on CNBC Mon­day morn­ing. Or­a­cle’s pro­posal made “many rep­re­sen­ta­tions for na­tional se­cu­rity is­sues,” Mnuchin said. He also noted a new com­mit­ment — by whom, he didn’t say — to make TikTok’s global op­er­a­tions a U.S.­head­quar­tered com­pany with 20,000 new jobs. Nei­ther TikTok nor Or­a­cle men­tioned that pledge Mon­day, although TikTok said in July that it would add 10,000 U.S. jobs

TikTok said in a state­ment Mon­day that its pro­posal to the Trea­sury Depart­ment should “re­solve the Ad­min­is­tra­tion’s se­cu­rity con­cerns” and em­pha­sized the im­por­tance of its app to the 100 mil­lion users it claims in the U.S.

TikTok, which says it has about 700 mil­lion glob­ally, is known for its fun, goofy videos of danc­ing, lip­sync­ing, pranks and jokes. It’s also home to more po­lit­i­cal ma­te­rial, some of which is crit­i­cal of Trump.

An Aug. 6 Trump or­der threat­ened a vague ban on TikTok, cre­at­ing a sense of emer­gency and seed­ing chaos into an ex­ist­ing na­tional­se­cu­rity re­view of TikTok by a U.S. in­ter­a­gency group, the Com­mit­tee on For­eign In­vest­ment in the United States, or CFIUS. A sub­se­quent Aug. 14 or­der de­manded that ByteDance di­vest its U.S. busi­ness. In ad­di­tion, Trump in­sisted that the U.S. gov­ern­ment get a cut of any deal, some­thing ex­perts said was un­prece­dented and pos­si­bly il­le­gal.

Mat­ters were com­pli­cated fur­ther when the Chi­nese gov­ern­ment ap­peared to sug­gest that the tech­nol­ogy used in TikTok’s al­go­rithm could not be ex­ported with­out gov­ern­ment per­mis­sion. On Sun­day, ByteDance tapped Or­a­cle as its U.S. part­ner, em­brac­ing a com­pany whose co­founder Larry El­li­son has raised funds for Trump. Its de­ci­sion also fol­lowed crit­i­cism of Mi­crosoft by a Trump trade ad­viser, Peter Navarro.

Or­a­cle and TikTok did not an­swer ques­tions about the struc­ture of the pro­posal on Mon­day. The Trea­sury Depart­ment didn’t re­turn an emailed re­quest for more in­for­ma­tion about the pro­posal.

“We don’t know that this is the wrong out­come. But we do know that (the ad­min­is­tra­tion) shouldn’t have politi­cized it this way,” said Derek Scis­sors, who stud­ies China at the Amer­i­can En­ter­prise In­sti­tute think tank.

The prom­ise of 20,000 new jobs and a U.S. head­quar­ters for TikTok “cer­tainly smacks of crony cap­i­tal­ism,” said Chorzempa.

Eura­sia an­a­lyst Paul Tri­olo noted that if ByteDance re­tains own­er­ship of TikTok, it won’t have ac­tu­ally sold any­thing. China doesn’t want to be seen ap­prov­ing a deal where a Chi­nese com­pany is forced to a sale or stripped of its in­tel­lec­tual prop­erty, he said, while Trump can’t eas­ily walk back a ban with­out ma­jor con­ces­sions he can point to. “A face sav­ing way out of this will be very dif­fi­cult for all par­ties to find,” he said.

Any deal must still be re­viewed by the Com­mit­tee on For­eign In­vest­ment in the United States, or CFIUS, a group chaired by the Trea­sury Sec­re­tary that stud­ies merg­ers for na­tional se­cu­rity rea­sons. Mnuchin said he ex­pects the group to re­view the pro­posal this week and later make a rec­om­men­da­tion to the pres­i­dent.

The pres­i­dent can ap­prove or deny a trans­ac­tion rec­om­mended by the panel, though Trump has al­ready voiced sup­port for Or­a­cle as a “great com­pany” that could han­dle the ac­qui­si­tion.

Or­a­cle pri­mar­ily makes data­base soft­ware. It com­petes with tech giants such as Mi­crosoft and Ama­zon that pro­vide cloud ser­vices as well as busi­ness­soft­ware spe­cial­ists like Sales­force. Some an­a­lysts see Or­a­cle’s in­ter­est in a con­sumer busi­ness as mis­guided, but its shares popped 4.3% on Mon­day to $59.46.

If the ar­range­ment is ap­proved by the U.S. gov­ern­ment, TikTok would be al­lowed to con­tinue op­er­at­ing.

Whether the Or­a­cle­TikTok deal will al­low the sidestep­ping of Chi­nese ex­port re­stric­tions de­pends on which en­tity re­tains con­trol of TikTok in the U.S., said Paul Haswell, a Hong Kong­based part­ner at law firm Pin­sent Ma­sons.

An­other loose end is Wal­mart, which had planned to part­ner with Mi­crosoft on the ac­qui­si­tion. The re­tailer said Sun­day it “con­tin­ues to have an in­ter­est in a TikTok in­vest­ment” and is talk­ing about it with ByteDance and other par­ties.

Ni­co­lar Asfouri / AFP via Getty Im­ages

This photo illustrati­on shows the logo of TikTok and a U.S. flag on the screens of two lap­tops in Bei­jing. The com­pany has agreed to a deal with Or­a­cle, but the de­tails are pri­vate.

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