Oracle on Monday confirmed it has struck a deal with ByteDance, the parent of viral video app TikTok, after US Treasury Secretary Steven Mnuchin told CNBC that the US government will review the Oracle proposal this week and then make a decision.
The news is released only one day after Microsoft, which competed with Oracle in cloud computing and database sectors, announced that its takeover offer was rejected by ByteDance.
The deal is likely not to be structured as an outright sale, but it will make Oracle a "trusted tech partner" for TikTok in the US. The short video platform also committed to providing nearly 20,000 jobs for the US, its promised global headquarters.
"I will just say from our standpoint, we'll need to make sure that the code is, one, secure, American's data is secure, that the phones are secure and we'll be looking to have discussions with Oracle over the next few days with our technical teams,” said Sec. Mnuchin.
He said that after a CFIUS review, a recommendation will be made to President Donald Trump.
"Oracle confirms Secretary Mnuchin's statement that it is part of the proposal submitted by ByteDance to the Treasury Department over the weekend in which Oracle will serve as the trusted technology provider," according to the Oracle statement.
It is more appropriate to call the deal a partnership rather than an acquisition, because it does not involve the exchange of significant assets, The Wall Street Journal reported, citing two people familiar with the Oracle transaction.
At least some of ByteDance’s existing investors, including U.S. investment firms Sequoia Capital and General Atlantic, will get stakes in the venture as part of the deal, said the report.
It's a victory for Larry Ellison, the chairman of Oracle, and one of the few technology tycoons who has been openly supportive of Donald Trump, as a donor and host for major fundraising events.
While it looks like Trump crashed into Microsoft's previous discussion with TikTok sometime in late July to early August, the US President also voiced support for a potential Oracle bid. "Well I think Oracle is a great company and I think its owner is a tremendous guy, a tremendous person. I think that Oracle would be certainly somebody that could handle it," said the President.
If the deal is concluded, as TikTok's technology partner, Oracle may provide cloud computing services for TikTok, thereby bringing growth to its relatively slow-developing business. Oracle was not among the top five cloud infrastructure providers by revenue in 2019, according to technology research company Gartner.
Chinese media Caixin also reported that Walmart, previously siding with Microsoft, is also still in the discussion to become another partner of TikTok, likely in a similar position as Oracle's, and operate the short video app's e-commerce side.
In August, TikTok has more than 100 million monthly active users in the US, and many millions of them are in their teens, the New York Times reported.