Oracle will partner with TikTok, but will this satisfy Trump?

An executive order targeting the popular video-sharing app TikTok made doing business with its Chinese parent company, Bytedance, illegal starting on September 20, 2020. (Dreamstime/TNS)
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By Wendy Lee Los Angeles Times (TNS)

Oracle Corp. has succeeded in its bid to partner with the social media platform TikTok after its Chinese parent company, ByteDance, rejected an offer from Microsoft.

The news, first reported by The Wall Street Journal, caught some analysts by surprise because they had widely expected Microsoft, in a partnership with Walmart, to acquire TikTok’s U.S. operations. The Los Angeles Times has not independently confirmed the Journal’s report.

“ByteDance let us know today they would not be selling TikTok’s U.S. operations to Microsoft,” the Redmond, Washington, tech company said in a statement Sunday. “We are confident our proposal would have been good for TikTok’s users, while protecting national security interests.”

A Microsoft spokeswoman declined to say why ByteDance made that decision. TikTok did not respond to a request for comment.

The decision comes a week before the Trump administration plans to ban the social video app if it continues to be owned by ByteDance.

The Trump administration has put pressure on ByteDance to divest TikTok’s U.S. operations because of national security issues. Trump has raised concerns about whether TikTok gives information about U.S. users to the Chinese government. TikTok says that it has not and that it stores its U.S. user data in Virginia and backs it up in Singapore.

On Sunday, the Journal — citing an unidentified source — said that Oracle had been chosen as the “trusted tech partner” for TikTok in the U.S., but the paper indicated that that “deal is likely not to be structured as an outright sale.”

A sale of TikTok’s U.S. operations became more complicated when the Chinese government updated its export rules to require government approval for the sale of artificial intelligence, which many believe would include TikTok’s algorithm.

Trump signed an executive order that would bar individuals or U.S. companies from transactions with ByteDance’s TikTok starting Sept. 20. Many analysts believe the order could cause TikTok to be removed from Apple’s and Google’s mobile app stores in the U.S.

Any ban on TikTok’s app in the U.S. would hurt many of Los Angeles’ video creators who rely on the platform for income from brand deals. Legal experts say that TikTok’s roughly 1,500 U.S. employees could be at risk of not receiving a paycheck if the order goes into effect. One hundred million Americans use the popular social video app.

TikTok has sued the Trump administration to block the order, arguing it is unconstitutional.

Some analysts questioned whether the potential Oracle deal would satisfy the Trump administration because it may not involve a sale of TikTok’s operations to a U.S. company. A shutdown of TikTok in the U.S. may still be possible, analysts said.

“TikTok’s days in the U.S. likely are numbered, with a shutdown now the next step,” Daniel Ives, an analyst with Wedbush Securities, said in a research note. “Unless some last minute changes, ByteDance heads into the White House deadline this week with some dark days ahead as the plug now likely gets pulled on the TikTok app within the US.”

Oracle did not respond to a request for comment. Analysts said they were uncertain whether a technology partnership with Oracle would be enough to meet a separate executive order signed by Trump that requires ByteDance to divest TikTok’s U.S. operations by Nov. 12.

In an interview, Ives said that a technology partnership could mean that Oracle would provide back-end technology to TikTok, helping assure the Trump administration’s concerns about national security regarding U.S. user data.

“They could control the inflows and outflows from a national security perspective,” Ives said. “If that’s enough of a stamp for the White House to have comfort with the deal, that is something that remains to be seen.”

A U.S. Commerce Department spokesman did not return a request for comment.

Any deal between TikTok and Oracle would be looked over by the Committee on Foreign Investment in the United States, said Carl Tobias, a law professor at the University of Richmond.

The Trump administration has taken action against other apps owned by Chinese companies, including messaging platform WeChat, as trade tensions continue between the U.S. and China.

“It’s a way to rally people politically,” said Gene Munster, a managing partner at venture capital firm Loup Ventures. “Essentially these become political tools.”

Munster said that he believes that tension will start to recede after the election.

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