Oracle Corp, one of the most lucrative but unflashy company in Silicon Valley, acquired TikTok US business in the battlefield against Microsoft and Walmart. At first, Microsoft's acquisition seemed promising, but it was overturned during the last minute negotiations. The relation between Oracle, which provides business software and consulting service for enterprises, and TikTok, a 15-second video sharing platform which is popular among teenagers, seems very awkward for investors or businesspeople. However, the most important factor ‘data’ lies behind this awkward encounter between both firms.
Timeline
According to WSJ, Oracle has been selected as a technology partner for TikTok's US business. The deal is quite far from the previously known acquisition of the entire business ever since Oracle has been founded in 1977. NYT cited that Oracle is most likely to gain a stake in TikTok, yet the size of investment is unclear. However, it is clear that this negotiation will bring Oracle deeply involved in TikTok's US business.
The rise of acquisition issue of TikTok's US business was due to a conflict between the US and China. Earlier, US President Donald Trump announced on July 31 that he would ban the use of TikTok in the United States. The reason was that ByteDance, a TikTok operator based in China, leaked personal information of Americans to the Communist Party in China, which could harm national security. On August 6, he signed an executive order to block all the transactions with ByteDance to US companies within 45 days. In addition, it issued a follow-up order to sell ByteDance's TikTok US business within 90 days. Since then, Microsoft has emerged as a prominent takeover negotiator, Walmart later joined the combat. I personally regarded Walmart was suitable for acquiring TikTok platform for the synergy of its e-commerce sales by live streaming).
However, Microsoft issued an official statement indicating that ByteDance will not sell TikTok to Microsoft, in that protecting TikTok user data and US security is need to be more prioritized. An hour later, news about Oracle's acquisition of TikTok came out.
Oracle's bet on TikTok
Oracle is a traditional business-to-business (B2B) operating corporate. It has grown into a global software company based on the enterprise database market. There seems to be a distant business relationship with TikTok, a B2C business targeting consumers, especially youngsters. This is one of the backgrounds in which Microsoft, which has relatively rich B2C business experience, was superior in the acquisition competition. However, given that Oracle is trying to grow its cloud computing and consumer data business, acquiring TikTok US business can create business synergies.
First of all, TikTok can become an excellent anchor tenant of Oracle’s cloud infrastructure. This is because new space is needed to store the enormous amount of data that users create when separating the TikTok US business from ByteDance. TikTok has more than 100 million users in the United States. Oracle has struggled to compete its cloud business with Azure and AWS. According to market research firm Gartner, last year, Oracle was not in the top five cloud-computing companies by revenue. Microsoft is in second place.
<Bloomberg> pointed out that TikTok will be one of the greatest company to support Oracle in building its cloud infrastructure and enhance the user base ecosystem. In addition, Oracle proposed to make 20,000 new jobs in TikTok global business, Mnuchin said.
It is unclear whether Oracle will fully acquire TikTok's US business. It may remain one of the major partners. However, as it has been selected as a technology partner, Oracle is expected to use the TikTok platform to enhance its cloud business capabilities.
Source: WSJ, NYT, Bloomberg
https://www.wsj.com/articles/microsoft-drops-out-of-bidding-for-tiktoks-u-s-operations-11600039821
https://www.wsj.com/articles/walmart-joins-microsofts-pursuit-of-tiktok-11598544354
https://www.nytimes.com/2020/08/28/technology/tiktok-walmart-ecommerce.html
https://www.nytimes.com/2020/09/14/technology/deal-tiktok-us-china-trump.html
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