Oracle reportedly reaches partnership deal with TikTok

14 Sep 2020

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Reports suggest that Oracle has reached an agreement to be a ‘trusted tech partner’ of TikTok, while Microsoft has confirmed that its bid was rejected.

On Sunday (13 September), the Wall Street Journal reported that Oracle will become the ‘trusted tech partner’ of ByteDance-owned social media platform TikTok in the US, subject to a review by the White House.

Sources familiar with the matter told Reuters and CNN that the agreement between Oracle and TikTok is not an outright purchase, but rather a partnership aimed at appeasing both the US and China.

Oracle was one of a number of companies vying to purchase the video-sharing platform, after US president Donald Trump published an executive order last month stating that TikTok would be banned in the US unless the app was sold by its Chinese parent company.

He claimed that TikTok posed national security concerns relating to the personal data the platform handles.

‘The car can be sold but not the engine’

Microsoft emerged as the first potential bidder for the business, confirming in August that it had entered negotiations with ByteDance. However, Microsoft is now out of the running.

In a statement yesterday, Microsoft said: “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.

“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.”

Meanwhile, Chinese state broadcaster CGTN reported that ByteDance would not sell TikTok’s US operations to either Microsoft or Oracle. A source also told the South China Morning Post that ByteDance would not sell or transfer TikTok’s core algorithm to Microsoft or Oracle.

The source told the Chinese publication that the team in the US could work to develop a new algorithm of their own, but that TikTok’s code will not be handed out. “The car can be sold, but not the engine,” they said.

Oracle’s bid for TikTok

Reports that Larry Ellison’s multinational technology business Oracle was interested in acquiring TikTok first emerged in the middle of August, with the Financial Times saying that Ellison was “seriously considering” acquiring TikTok’s operations in the US, Canada, Australia and New Zealand.

Sources told the Financial Times that Oracle was working with a group of investors that already own a stake in ByteDance, including General Atlantic and Sequoia Capital.

The publication described Oracle co-founder Ellison as one of “few people in Silicon Valley” who has openly supported Trump, with the tech billionaire hosting a fundraiser for Trump at his estate in California.

According to CNN, the exact nature of Oracle’s reported agreement with TikTok remains unclear. If the two companies have agreed to a partnership, it could be a measure to appease China, which recently updated its export rules related to AI.

Selling the social media platform

Trump had said that a ban on TikTok was necessary to deal with the “national emergency” posed by the app. The president claimed that the spread of mobile apps developed and owned by companies in China poses a threat to “national security, foreign policy and economy.”

TikTok, which has 100m users in the US, was described by Trump as “too big” and “too invasive”. However, he added that it would be OK if “a big company, a secure company, a very American company” took over TikTok’s US business.

In response to the executive order, TikTok took legal action against the US government in recent weeks, filing a case to the federal district court in California.

“By banning TikTok with no notice or opportunity to be heard (whether before or after the fact), the executive order violates the due process protections of the [US] Fifth Amendment,” the legal complaint stated.

Kelly Earley was a journalist with Silicon Republic