Oracle Considers Acquiring TikTok's US Operations: Latest Developments in a Complex Deal

Oracle Considers Acquiring TikTok's US Operations: Latest Developments in a Complex DealMarch 19 Oracle is evaluating a proposal to acquire TikTok's US operations, according to sources familiar with the matter. The proposal suggests Oracle would provide security assurances and hold a minority stake in a newly formed US entity

Oracle Considers Acquiring TikTok's US Operations: Latest Developments in a Complex Deal

March 19 Oracle is evaluating a proposal to acquire TikTok's US operations, according to sources familiar with the matter. The proposal suggests Oracle would provide security assurances and hold a minority stake in a newly formed US entity. However, control of TikTok's core algorithm would likely remain with its Chinese parent company, ByteDance. The proposal, circulated within the Trump administration last week, aims to facilitate a partnership between Oracle and a US buyer to secure US user data and eliminate any potential "backdoors" exploitable by China.

The goal is to avoid both a court-ordered divestiture of TikTok from ByteDance under US law and a ban of the app in the US. This aligns with President Trump's position; on his first day in office, he extended the original ban deadline to April 5th to allow time for a deal. He has publicly endorsed a sale that would allow TikTok to continue operating in the US.

Oracle already has a partnership with TikTok, securing US user data through the Texas plan. However, the operational model under this proposal and the nature of communication with ByteDance remain undefined. Sources emphasize that the proposal is in its early stages, with details subject to change. With less than three weeks until the deadline, any agreement would need approval from the Trump administration, ByteDance, and the Chinese government, significantly increasing complexity.

Retaining algorithm control by ByteDance could secure support from the company itself and the Chinese government. However, this might violate legislation signed by President Biden last year and fail to fully alleviate US concerns about potential Chinese access to sensitive data via TikTok. A source revealed that the Chinese government is aware of the proposal involving Oracle providing security and holding a minority stake. This source suggested that if the algorithm remains entirely under Chinese control, the Chinese government might accept a deal involving Oracle.

Oracle and the White House have declined to comment. TikTok also declined to comment, and representatives from ByteDance did not respond to requests for comment. The US market, one of TikTok's most important, is estimated to be worth $50 billion (based on last year's valuation). It's unclear whether ByteDance is involved in the current discussions, and there is skepticism about whether ByteDance or the Chinese government would approve a sale of the US operations.

Public bidders include a team led by billionaire Frank McCourt and Reddit co-founder Alexis Ohanian; another team comprising tech entrepreneur Jesse Tinsley and YouTuber MrBeast; and a merger proposal from San Francisco AI company Perplexity AI. Microsoft remains a potential bidder, although a spokesperson declined to comment on whether theyd participate.

Previously, Trump tentatively suggested Oracle founder Larry Ellison as a potential bidder, while the Chinese government considered a potential acquisition by billionaire and Trump advisor Elon Musk. However, Musk, already owning social media platform X, has publicly stated disinterest.

A full acquisition or significant investment by Oracle seems unlikely. The company is currently allocating significant cash flow to building data centers and carries debt from previous acquisitions. Furthermore, Oracle's expertise lies in technological infrastructure, not consumer-facing apps.

It's worth noting that in 2020, Oracle was Trump's initial choice for a TikTok buyer, but his attempts to ban TikTok on national security grounds ultimately failed. The US government tried to force ByteDance to sell its US assets to a consortium including Oracle and Walmart, but this deal fell apart due to ByteDance's legal challenges and the impact of the COVID-19 pandemic.

Since then, Oracle has built a substantial cloud infrastructure business with TikTok. Evercore ISI estimated Oracle's annual revenue from TikTok could reach $500 million to $800 million by mid-2024. Oracle was also tasked with helping the app isolate sensitive US user data from ByteDance, although this plan didn't gain Washington regulatory approval.

During his reelection campaign, Trump dropped his ban on TikTok, claiming the app helped his 2024 campaign reach younger voters. He instead pressed for a sale to ensure TikTok's continued operation in the US. Since taking office in January, hes extended the sale deadline once, stating his willingness to extend it again, but believing a deal is achievable.

Currently, discussions regarding TikToks fate are overseen by Vice President JD Vance and his advisory team, including his chief of staff Jacob Reses and aide Sean Cooksey. White House National Security Advisor Mike Waltz, who voted in favor of last years legislation to divest or ban TikTok, is also involved. On Friday, Vance indicated he expected Trump to finalize a high-level agreement to create a "separate US TikTok corporate entity," addressing security concerns related to the app's Chinese ties. He explained, "We will achieve the continued operation of TikTok, but in a way that is in Americas interests."

In conclusion, Oracle's proposed acquisition of TikTok's US operations is a multi-faceted deal fraught with uncertainty. The outcome will not only impact TikTok's future in the US but also have far-reaching implications for US-China technological relations. Success hinges on a delicate balance of political will, commercial interests, and technical feasibility. Time is of the essence, and the next few weeks will be crucial in determining TikTok's fate in the US.