With TikTok Deal, Larry Ellison Signals That Oracle’s Cloud Computing Ambitions Are No Longer A Pie In The Sky

The US Treasury Department on Monday (Sep 14) said that the Trump administration will conduct a comprehensive national security review of the agreement that business software and consulting services firm Oracle has reportedly reached with ByteDance Ltd, the Chinese owner of the popular video-sharing app TikTok, The Wall Street Journal reported.

Just one day ahead of the deadline that U.S President Donald Trump set for ByteDance to divest TikTok’s US operations or risk being blacklisted in America, Beijing-based company confirmed that it has accepted a partnership offer from Oracle on TikTok’s US operations.

U.S Treasury Secretary Steven Mnuchin confirmed to CNBC that the deal will undergo a review by the Committee on Foreign Investment in the US as well as a “national security review under the president’s executive order.”

“We did get a proposal over the weekend that includes Oracle as the trusted technology partner, with Oracle making many representations for national security issues,” Mnuchin said, adding that, “there’s also a commitment to create TikTok Global as a US-headquartered company with 20,000 new jobs.”

“A critical factor for us driving national security is making sure the technology on Americans’ phones is safe and making sure it is not corrupt,” Mnuchin said. “We have a lot of confidence in both Microsoft and Oracle. They’ve chosen Oracle. We’ll be reviewing it with their technical teams and our technical teams to see if they can make the representations we need.”

“We will be reviewing that at the CFIUS committee this week, and then, we will be making a recommendation to the president and reviewing it with him,” the treasury secretary added.

It also remains to be seen if Chinese government approval is required to finalise the deal

On 29 August, China’s ministry of commerce announced that it has added AI interface technologies such as speech and text recognition, and those that analyze data to make personalized content recommendations to a revised list of export-control products. Government permits will be required for overseas transfers to "safeguard national economic security," it said.

The new set of restrictions imposed by Chinese government on the export of artificial intelligence technologies was seen as a setback to ByteDance’s hopes of quickly completing a deal with suitors for the sale of its US operations of video app TikTok.

Why Oracle wants to partner with TikTok

Under the proposed agreement, Oracle is unlikely to get a majority stake in TikTok but will work with Bytedance to move data on American users of Tiktok to Oracle’s cloud-computing infrastructure and house that information only in the US.

For the TikTok bid, Oracle has joined forces with venture capital firms including General Atlantic, Sequoia Capital and Coatue Management LLC, who already have a stake in the Chinese firm.

It is also not clear if the Oracle-ByteDance will cover TikTok’s algorithms which is widely viewed as providing critical edge to the Chinese app.

It is widely believed that close ties of Oracle’s top leadership with current U.S administration may have influenced Bytedance’s decision.

Oracle’s billionaire co-founder Larry Ellison is one of the few US tech executives who has openly supported Trump, though it’s not clear whether Oracle is White House’s preferred suitor for TikTok. Earlier this year, Ellison hosted a fundraiser at his home for the president. The company’s influential Chief Executive Safra Catz served as a part of Trump transition team in 2016 and has donated to his re-election campaign.

Till yesterday’s surprise announcement, Microsoft was generally viewed as the front-runner in the race to acquire TikTok’s US operations but the company released a statement on Sunday saying that it is no longer in contention. Retail behemoth Walmart had also announced that it is partnering with Microsoft in its bid for the US operation of TikTok.

“ByteDance let us know today they would not be selling TikTok’s US operations to Microsoft,” and adding, “we are confident our proposal would have been good for TikTok’s users, while protecting national security interests.” a company statement read.

Oracle has long been a trusted vendor of database and storage solutions for enterprises but was a relatively late entrant to the cloud market. Its attempt to transition from legacy vendor of enterprise software licences to cloud computing has faced several challenges

It has recently accelerated its efforts to challenge the cloud leaders including Amazon and Microsoft.

With Oracle recently becoming the cloud provider for Zoom Video Communications Inc, TikTok deal is sure to give company further momentum in the cloud computing space.