Oracle beat Microsoft in the bid for TikTok's US operations with a deal structured as a partnership— opposed to an outright sale— in a cautious attempt to navigate geopolitical tensions between Beijing and Washington.
The tech giant Oracle wheeled and dealed on Monday with ByteDance, the Chinese owner of viral video-sharing app TikTok, Reuters reported.
In a press release Monday morning, Oracle confirmed "[U.S. Treasury] 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," adding that "Oracle has a 40-year track record providing secure, highly performant technology solutions."
Mnuchin told CNBC that the federal government plans to review the deal this week with a focus on security: "I will just say from our standpoint, we'll need to make sure that the code is, one, secure, Americans' 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."
The approval deadline was Sept. 20 and the current proposal included a commitment to create a US headquartered company with 20,000 new jobs.
The Committee on Foreign Investment in the United States (CFIUS), which assesses negotiations, is overseeing the ByteDance-Oracle talks. Mnuchin mentioned a separate national security review by the Trump administration.
Oracle, a multinational company headquartered in California, is the second largest software company behind Microsoft. However, Oracle's stock just surged with shares jumping more than six percent after ByteDance named the business as its US pick. While Oracle's revenue has declined in four of the eight most recent quarters, TikTok sources revenue through user advertisement. Oracle offers software that marketers can use to manage the distribution of ads on Facebook and other channels.
The database management and cloud computing challengers are also interested in the social-media asset to boost brand visibility among young consumers. TikTok captivates the entertainment of over 100 million monthly active users in the U.S. composed primarily of teens with a third aged 14 and under, The New York Times reported earlier this month.
It should be noted that Oracle maintains ties to the US government. CEO Safra Catz was part of President Donald Trump’s transition team. Larry Ellison, co-founder and chairman, hosted a fundraising event for Trump’s re-election campaign at one of his California homes earlier this year. Leon Panetta, a director of the Central Intelligence Agency and secretary of the Defense Department under the Obama administration, sits on Oracle’s board.
This comes after TikTok filed a lawsuit in the US District Court for the Central District of California, challenging Trump's executive order that prohibits American companies from partnering with the Chinese-owned platform. The social media service claimed that the Trump administration violated the due process protections of the Fifth Amendments "with no notice or opportunity to be heard" when the federal government ordered the ban, allegedly never offering documented evidence proving that TikTok posed a security threat to the nation.
"The Administration failed to follow due process and act in good faith, neither providing evidence that TikTok was an actual threat, nor justification for its punitive actions," the company wrote in a press statement on Aug. 24. "We believe the Administration's decisions were heavily politicized, and industry experts have said the same."
On Aug. 14, Trump signed an executive order demanding that TikTok's parent company, ByteDance, sell all US assets and destroy all stored data within three months. The lawsuit does not challenge this separate order by the Committee on Foreign Investment.
Forty percent of Americans back Trump's threat to ban TikTok if the sale is not bought by a US vendor, a Reuters-Ipsos national poll found last month. Among Trump's Republican party, 69 percent supported his action, although only 32 percent expressed familiarity with TikTok.
Prior to these events, Trump barred the owners of TikTok and Tencent Holding Ltd.'s messenger app WeChat from servicing any business in the US as of Sept. 15 on national security grounds.
TikTok has repeatedly argued that the platform protects user data and stores information on servers outside of China.
"As a company we have always focused on transparency," admins wrote, citing more than 1,500 employees across the US with 10,000 more jobs planned in California, Texas, New York, Tennessee, Florida, Michigan, Illinois, and Washington State. "[M]any of the country's leading brands are on TikTok to connect with consumers more authentically and directly than they can elsewhere."
TikTok referenced key personnel—including the company's CEO, Global Chief Security Officer, and General Counsel—who are all reportedly Americans based in the United States "and therefore are not subject to Chinese law." The application stores US user data on servers located in the United States and Singapore, TikTok heads asserted.
"Now is the time for us to act. We do not take suing the government lightly, however we feel we have no choice but to take action to protect our rights, and the rights of our community and employees," TikTok officials concluded.