Oracle will become TikTok’s U.S. partner in a deal that will allow the social media app to remain operating in the country.
Sept. 14, 2020
Just three weeks ago, I gave a truncated timeline of the twists and turns of this TikTok deal. Well, you can tack on a CEO walk-out and Walmart becoming a potential suitor to that list since then. The saga looks like it may have finally come to a close with the partnership between Oracle (NYSE: ORCL) and TikTok. The Larry Ellison-run company pipped Microsoft (NASDAQ: MSFT) to the post to pen a deal with the fastest growing app in the U.S.
However, they won’t be popping champagne in Redwood Shores HQ just yet as the deal still has to be approved by The White House and Committee of Foreign Investment. Oracle and TikTok parent company ByteDance must prove that the deal is enough to sate the current administration’s concerns over the security of the data collected on the app. Sources say that the agreement is closer to a partnership than an acquisition, which may not be exactly what Trump had in mind when he mandated that the Chinese company sell its U.S. operations by September 20th. This fact, coupled with the geopolitical tempest that has surrounded TikTok over the past two months, and the heightened tensions recently between China and the U.S. make me wonder if we’re not completely out of the woods yet.
Why does Oracle want TikTok?
It’s reported that Oracle’s pursuit of TikTok was motivated primarily by kickstarting the company’s cloud business. Facilitating the technology and data of 100 million monthly active users across America would go some way to elevating Oracle’s operations to the levels of the tech giants of Amazon, Microsoft, and Google.
There is also the fact that deals like this don’t come along very often. When the fastest growing social media platform goes on the market in such a manner, it’s going to garner interest from just about anyone that can afford it. This explains why we’ve seen such a conveyor belt of suitors queuing up for what seems like a bargain.
Whatever the motivations and circumstances that drove this deal were, the reality of it is that Oracle is partnering with a business that is a million miles from its day-to-day operations. While there is a huge upside, there remains a slew of potential pitfalls as well, not least of which the fickle nature of the majority of its user base, teens.
The announcement of the deal has sent Oracle stock up 8% at the time of writing in pre-market trading.
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