Oracle, Not Microsoft, Wins TikTok Buyout Bid
- By Kurt Mackie
- September 14, 2020
Oracle's proposal to acquire TikTok's social media operations outside China emerged victorious over the weekend, putting an end to Microsoft's competing buyout bid.
Various U.S. tech companies began discussions last month to buy TikTok's U.S. operations, which are owned by Beijing-based ByteDance. Those acquisition talks were prompted by allegations by the Trump administration that TikTok was funneling information on U.S. users to the Chinese government, and was thus a threat to U.S. security.
Microsoft was considered to be in the running for an acquisition, joined later in its bidding effort by retailer Walmart. Oracle had also entered into the TikTok discussions, as well as others.
Last year, ByteDance had claimed that its U.S. TikTok operations had been separated from its China operations. The company took that action in response to the U.S. Department of Treasury's Committee on Foreign Investment in the United States (CFIUS) claims that TikTok represented a U.S. national security risk. The U.S. TikTok data is stored in the United States, with a backup in Singapore, ByteDance had said, which apparently didn't appease U.S. officials.
The competition to buy the U.S. TikTok assets took on the disconcerting air of a U.S. state intervention on behalf of U.S. tech companies, with speculation about Trump company favoritism being involved. Trump also had suggested that the Treasury Department would get revenue out of a deal.
China is a semi-closed market for U.S. businesses, which have to partner with a Chinese company in order to do business there. The prospect of China using social media to spy on Americans may be disturbing, but it's peculiarly shadowed by U.S. National Security Agency (NSA) efforts to do the very same thing, as exposed years ago by NSA whistleblower Edward Snowden. This domestic NSA spying was recently was rebuffed by a federal court in a case that involved AT&T, another U.S. company that collaborated on NSA domestic spying.
Microsoft had been the first tech company to join in in the NSA's PRISM spying program, according to a leaked contractor slide. If it had won the TikTok bid, Microsoft had promised to add "world-class security, privacy, and digital safety protections" to the social media service.
On Sunday, Microsoft issued an announcement indicating that ByteDance won't sell TikTok's U.S. operations to Microsoft. On Monday, Oracle issued an announcement confirming Treasury Secretary Steve Mnuchin's statement over the weekend that "Oracle will serve as the trusted technology partner" to ByteDance.
Mnuchin's statement wasn't available at press time, but he did talk with CNBC on Monday. In that interview, Mnuchin said that the actual deadline for coming to an agreement was Sept. 20, not Sept. 15. He added that there are two processes that still need to be completed regarding the Oracle deal: a review by the CFIUS and a national security review.
"I will confirm that we did get a proposal over the weekend that includes Oracle as the trusted technology partner, with Oracle making many representations for national security issues," Mnuchin told CNBC. "There's also a commitment to create TikTok Global, a U.S.-headquartered company with 20,000 new jobs. I'm not going to go into the entire proposal -- we will be reviewing that at the CFIUS committee this week. And then we will be making a recommendation to the president and reviewing it with him."
He added that the Treasury Department had a lot of confidence in Microsoft and Oracle on making the TikTok technology safe, and that there will be discussions with Oracle over security matters in the next few days.
The turnabout and deal-making has been confusing. ByteDance recently claimed that it wouldn't sell its TikTok U.S. operations to either Oracle or Microsoft, according to a Sunday-published Reuters article, which cited a state-run TV station in China.
Kurt Mackie is senior news producer for 1105 Media's Converge360 group.