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TikTok to partner with Oracle to avoid Trump's US ban, reports say

TikTok is facing a ban in the United States due to national security concerns, which the company have repeatedly denied

Adam Smith
Monday 14 September 2020 09:50 BST
(Mario Tama/Getty Images)
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Viral video app TikTok will be separated from its Chinese parent company Bytedance and be sold to Oracle, according to new reports.

Oracle has been chosen as a “technology partner” but the negotiations would result in a restructuring rather than sale, the reports claimed.

The app was previously expected to be sold to Microsoft.

Microsoft announced Sunday that its bid to acquire TikTok's US operations was rejected, removing the tech giant from the running a week before President Donald Trump promises to follow through with a plan to ban the Chinese-owned app in the US over spying concerns.

“Bytedance let us know today they would not be selling TikTok’s US operations to Microsoft. We are confident our proposal would have been good for TikTok’s users, while protecting national security interests”, Microsoft said in its statement.

“We look forward to seeing how the service evolves in these important areas”, it concluded.

Walmart, which had planned to partner with Microsoft on the acquisition, said Sunday it "continues to have an interest in a TikTok investment" and is talking about it with Bytedance and other parties.

The Trump administration has threatened to ban TikTok by 20 September and ordered Bytedance to sell its US business, claiming national-security risks due to its Chinese ownership.  

The government worries about user data being funneled to Chinese authorities.  

TikTok denies it is a national-security risk and is suing to stop the administration from the threatened ban.

TikTok denies that it has shared user data with the Chinese government or that it would do so if asked. The company says it has not censored videos at the request of Chinese authorities and insists it is not a national-security threat.

TikTok has sued to stop the ban, but not the sale order. The negotiations have been complicated by several factors, including Trump's repeated demands that the U.S. government should get a "cut" of any deal, a stipulation and role for the president that experts say is unprecedented.

It's not clear if the proposed deal will only cover TikTok's US business, and, if so, how it will be split from the rest of TikTok's social media platform, which is popular worldwide.  

Any deal must still be reviewed by the Committee on Foreign Investment in the United States, known as CFIUS, a US government group chaired by the Treasury Secretary that studies mergers for national-security reasons.

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.

In addition, the Chinese government in late August unveiled new regulations that restrict exports of technology, likely including the artificial intelligence system TikTok uses to choose which videos to spool up to its users.  

That means ByteDance would have to obtain a license from China to export such technology to a foreign company.

Oracle primarily makes database software. It competes with tech giants such as Microsoft and Amazon that provide cloud services as well as business-software specialists like Salesforce.

Some analysts see Oracle's interest in a consumer business as misguided. Oracle should focus on enterprise-market acquisitions and not invest in a consumer app like TikTok.  

"It doesn't make any sense," said Jefferies analyst Brent Thill, who compares the idea to Delta Airlines buying a motorcycle company.

Thill suggested that TikTok competitors like Facebook and Snapchat should be "cheering on Oracle" as a buyer, because Oracle wouldn't "add a lot of value to the app."

Oracle co-founder Larry Ellison is unusual among tech executives for his public support of President Donald Trump, hosting a fundraiser for him in February at his Rancho Mirage estate.  

The company also hired a former top aide to Vice President Mike Pence; its CEO, Safra Catz, also served on Trump's transition team.

The president has previously said that Oracle was "a great company" that "could handle" buying TikTok. He declined to state his preference between Oracle and Microsoft as buyers.

The Independent has reached out to TikTok for comment.

Oracle declined to comment. The White House declined to comment.

Additional reporting by agencies

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