‘A 2nd or 3rd tier player’: How the size of Oracle’s China business helped it win TikTok

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On Sunday, Microsoft announced that TikTok parent Bytedance had rejected its bid to acquire TikTok’s U.S. operations, a new twist in a months-long bidding process that sought to save the short video app from being banned in the U.S.

According to the Wall Street Journal, TikTok is instead seeking to take on IT enterprise solutions company Oracle as a “trusted tech partner” for its U.S. business—a move TikTok hopes will avoid an outright sale of its hugely popular app.

“ByteDance let us know today they would not be selling TikTok’s U.S. operations to Microsoft,” Microsoft’s statement said. Microsoft had been the front runner for a TikTok takeover. Speculation of an imminent deal spiked last month when TikTok CEO Kevin Mayer quit unexpectedly after just four months on the job.

Microsoft says it remains confident its proposal would have been “good for TikTok’s users, while protecting national security interests.” Evidently, TikTok sees a better option in Oracle; experts say it may be because of Oracle’s limited footprint in China.

Tick, tock

President Donald Trump first floated the idea of banning TikTok in early July. Although Trump presented the action as retaliation for China “releasing” COVID-19 on the world, TikTok has faced suspicion from Washington for over a year. The White House characterizes the short-video app as a threat to national security (TikTok denies the allegations), and in 2019 the Federal Trade Commission fined TikTok for violating data privacy laws.

Following Trump’s threat in July, TikTok fell under review from the Committee on Foreign Investment in the U.S. (CFIUS)—an inter-agency review panel chaired by Treasury Secretary Steven Mnuchin that has been deployed before to roll back Chinese investment in the U.S.

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The CFIUS investigation prompted TikTok to consider offloading its U.S. assets and Microsoft emerged as a possible buyer. Then in early August, Trump signed an executive order demanding TikTok sell its U.S. operations to a U.S. company or else be banned. 

Bytedance, the app’s parent company, has sued the Trump Administration for threatening to ban it. Meanwhile, Beijing inserted itself into the narrative at the last minute, asserting last month that it has final say over any sale of “Chinese tech” to a foreign company—a potential roadblock to any deal.

“There have been a lot of extraordinary actions [in this] legal drama,” says Dan Wang, a technology analyst at Gavekal Research.

Why Oracle?

Ostensibly, the two governments—Washington and Beijing—want different things. Washington wants assurance that TikTok’s data collection practices aren’t a threat to national security. Beijing doesn’t want prize domestic software—namely the A.I.-driven algorithms that make TikTok so addictive—falling into the hands of a foreign firm. 

By choosing Oracle as a “trusted tech partner” rather than a buyer, TikTok might have found an arrangement that satisfies the demands of both. According to Reuters, taking on Oracle as a “trusted tech partner” means that Oracle would have control over TikTok’s user data while Bytedance retains ownership of the app’s algorithms.

The reported deal is certainly a victory for Oracle, and …read more

Source:: Fortune

      

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