ByteDance picks Oracle as partner to try to save TikTok US: Sources
September 14 2020 06:41 PM
A smartphone with the Tik Tok logo is seen in front of a displayed Oracle logo in this illustration
A smartphone with the Tik Tok logo is seen in front of a displayed Oracle logo in this illustration taken on Monday. Oracle beat Microsoft in the battle for the US arm of TikTok with a deal structured as a partnership rather than an outright sale to try to navigate geopolitical tensions between Beijing and Washington, people familiar with the matter have said.

Reuters/New York

Oracle beat Microsoft in the battle for the US arm of TikTok with a deal structured as a partnership rather than an outright sale to try to navigate geopolitical tensions between Beijing and Washington, people familiar with the matter said.

ByteDance, TikTok's Chinese owner, had been in talks to divest the US business of its hugely popular short-video app to Oracle or a consortium led by Microsoft Corp after US President Donald Trump ordered the sale last month and said he might otherwise shut it down.

While TikTok is best known for dancing videos that go viral among teenagers, US officials are concerned user information could be passed to China's Communist Party government.

TikTok, which has as many as 100mn US users, has said it would never share such data with Chinese authorities.

Sale negotiations were upended when China updated its export control rules last month, giving it a say over the transfer of TikTok's algorithm to a foreign buyer.

Reuters reported last week that China would rather see TikTok shut down in the US than allow a forced sale.

On Monday, China's state-run English television channel CGTN cited sources as saying ByteDance would not sell TikTok's US operations to Oracle or Microsoft, and would not give the source code for the platform to any US firm.

Under ByteDance's latest proposal, Oracle would be the firm's technology partner and assume management of TikTok's US user data, sources told Reuters on Sunday.

Oracle is also negotiating taking a stake in TikTok's US operations, they said.

The data is currently stored in Alphabet Inc's cloud.

Some of ByteDance's top investors, including General Atlantic and Sequoia, will also be given minority stakes in those operations, one of the people said.

It is unclear whether Trump, who wants a US technology firm to own most of TikTok in the US, will approve the deal.

US Treasury Secretary Steven Mnuchin told CNBC on Monday the administration would review it 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.

Mnuchin said the deadline to approve a deal was September 20 and that the current proposal included a commitment to create a US headquartered company with 20,000 new jobs.

The Committee on Foreign Investment in the United States (CFIUS), which reviews deals for national security risk, is overseeing the ByteDance-Oracle talks and Mnuchin said there would also be a separate national security review by the Trump administration.

"User data protection and assurances around how the company's algorithms push content to US users are thoughtful components of a substantive solution, but whether they can change political outcomes is a much more difficult question," said regulatory lawyer John Kabealo, who is not involved in the talks.

ByteDance plans to argue that CFIUS' approval two years ago of China Oceanwide Holdings Group Co Ltd's purchase of US insurer Genworth Financial Inc offers a precedent for its proposal with Oracle, the sources said.

In that deal, China Oceanwide agreed to use a US-based, third-party service to manage Genworth's US policyholder data.

ByteDance will argue a similar arrangement with Oracle can safeguard TikTok's US user data, the sources said.

ByteDance and Oracle did not respond to requests for comment.

The White House declined to comment.

China's foreign ministry spokesman Wang Wenbin declined to comment on Monday when asked at a press conference about the TikTok deal, but said TikTok was being "encircled" and "coerced" in the US into a transaction.

Oracle's chairman Larry Ellison is one of the tech world's few Trump supporters.

His firm has significant technological prowess in handling and safeguarding data, but no social media experience as its clientele comprises companies, rather than consumers.




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