Over the weekend, Oracle Corp. (NASDAQ: ORCL) and Walmart Inc. (NYSE: WMT) announced that the U.S. president granted “tentative approval” for the two companies to acquire 20% of a new U.S.-based company “responsible for providing all TikTok services to users in [the] United States and most of the users in the rest of the world.” Under the terms of the deal, Oracle will become TikTok’s secure cloud provider.
The new company is to be named TikTok Global, will be majority-owned by U.S. investors and will have a U.S. headquarters. Four of five company directors will be Americans and “[a]ll the TikTok technology will be in possession of TikTok Global, and comply with U.S. laws and privacy regulations.”
ByteDance, the China-based owner of TikTok, has agreed to separate itself from TikTok Global but is expected to retain majority ownership of the app. ByteDance, Oracle and Walmart have until November 12 to iron out the details of the deal or the Trump administration has promised a total ban on TikTok in the United States. As of midnight last night, U.S.-based TikTok users will no longer receive updates or download the TikTok app.
Is this the end of the saga that began in early August when the president issued an executive order promising to block TikTok in the United States based on national security concerns? Not hardly.
Most important, perhaps, is how the deal addresses the primary concern that Trump said led to the August order. How does this deal address the fear that the TikTok app steals other data on the phone? Who controls the app and the recommendation system that goes with it? How will TikTok Global manage that?
Oracle is a poor choice to fill that role because it has no experience doing anything like that. Walmart is interested only in the “omni-channel retail capabilities” that its ownership stake in TikTok Global gives the retailer.
And what does the United States gain? According to the president, a $5 billion education fund, which ByteDance says it knows nothing about. Reuters reported that the Chinese firm did say on its official Toutiao account in China that ByteDance “has been committed to investing in the education field” and that the company plans to continue working on online education projects “based on AI and video technology for students around the world.”
There probably was never any chance that Oracle would acquire 100% of a business that it has no experience with. Its 12.5% stake in TikTok Global makes far more sense, and Walmart’s 7.5% stake sort of makes sense (it could have licensed the brand for merchandising after all).
Technology industry analyst Ben Evans may have put his finger on what just happened: “… Trump has (he claims) a cheque to wave around. This is a shakedown, but it’s also a climbdown. Putin does this in Russia all the time, but manages it much better.”
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