World_news Oracle confirms deal with TikTok-owner ByteDance to become ‘trusted technology provider’ – CNBC

World_news

Oracle on Monday confirmed it has struck a deal with ByteDance, the Chinese owner of trendy video-sharing app TikTok, weeks after the Trump administrationordered a TikTok divestiturein the U.S. The deal proposal still needs approval from the U.S. Government.

“Oracle confirms 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,”Oracle said on Monday.

Mnuchin told CNBC on Monday morning that the U.S. government plans to review the deal this week. “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,” he said.

Depending on how the deal works out, it could boost Oracle’s cloud business. It might make Oracle more visible to young consumers and give it control over a prominent advertising venue.

Microsoft, which competes with Oracle in cloud computing and database software, was also interested in TikTok’s U.S. operations. ButMicrosoft’s bid was rejected, and the company announced it had withdrawn from the process on Sept. 13. Microsoftsaid on Aug. 2that it had been in talks to acquire TikTok in the U.S.Walmarthad also been interested in TikTok for its e-commerce potential, andjoined forceson a bid with Microsoft last week after aconsortium with Softbankand Google parent companyAlphabetfell apart. On Sunday Walmart said it was still keen to invest in TikTok. 

TikTok has said it has over 100 million monthly active users in the U.S. Many millions of users are in their teens, theNew York Timesreported in August. The largest age bracket among TikTok users in the United Kingdom in December was 18-24, according to industry research companyComscore.

As an app that entertains people, TikTok stands out from the rest of Oracle, which sells software to large businesses, schools and government institutions. Oracle and TikTok share an interest in marketing, though. TikTok derives revenue by showing users ads, and Oracle offers software that marketers can use to manage the distribution of ads onFacebookand other channels. TikTok has beenadding users quickly, while Oracle’s revenue has declinedin four of the eight most recent quarters.

Serving as a technology provider to TikTok might mean Oracle will offer its cloud infrastructure for the app to use. That would give Oracle another popular property for its executives to boast about as a cloud client, and it could attract additional cloud business. Last week on Oracle’s earnings conference call with analysts, Larry Ellison, a co-founder of the company and its chairman, made several references to video-calling serviceZoom’suse of the Oracle public cloud. Oracle wasnot among the top five cloud infrastructure providers by revenue in 2019, according to technology research company Gartner.

Acquisitions have helped Oracle expand its portfolio. The 2010 Sun deal made Oracle a notable seller of servers for data centers, and it entered the market for point-of-sale retail equipment with the 2014 purchase of Micros. Oracle’s $9.1 billion acquisition of cloud software company NetSuite in 2016 is the largest transaction in its 43-year history.

Oracle maintains ties to the U.S. Government. CEO Safra Catz was part of President Trump’s transition team, and Ellison hosted a fundraising event for Trump’s 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 President Obama, sits on Oracle’s board.  

ByteDance was founded in 2012, and that year it launched the news app Toutiao. It came out with TikTok for people outside China in 2017, after bringing out a similar app for people in China called Douyin. Also in 2017 ByteDance acquired a separate video sharing app called Musical.ly that had gained a following in the U.S. Last year the Committee on Foreign Investment in the U.S.contacted ByteDanceabout the Musical.ly deal because of concerns about the Chinese Government’s ability to access user data. 

ByteDance said it would adhere to the Chinese Government’supdated restrictions on exports, which now touch on “recommendation of personalized information services based on data analysis,” among other things. TikTok relies on recommendation systems to determine which videos it should show to users.

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