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Sunday, September 13, 2020

ByteDance picks Oracle in high-profile bid for video app TikTok

The Chinese company behind TikTok has chosen Oracle as a key partner to help run its U.S. operations, rejecting an acquisition bid from Microsoft.

The exact value or structure of the deal, including whether Oracle would own part or all of TikTok's U.S. assets, was not immediately clear. A source familiar with the matter described Oracle as a technology partner to TikTok and did not characterize the transaction as an outright sale.

The win for Oracle came after its top rival, Microsoft, announced on Sunday that its effort had fallen short. Microsoft's bid, which included retail giant Walmart, would have purchased TikTok's U.S. operations as a way of resolving U.S. government concerns about the popular video sharing app's possible ties to the Chinese government.

"ByteDance let us know today they would not be selling TikTok’s US operations to Microsoft," the company said Sunday evening.

American interest in TikTok increased when the Trump administration signaled in early August that it was considering banning the app amid worries that U.S. data is being funneled to the Chinese government. President Donald Trump signed an executive order on Aug. 6th that would prohibit TikTok from conducting transactions in the U.S. effective Sept. 20.

Beijing has since put in place regulations requiring the government to sign off on the sale of valuable technology, including algorithms like those that power TikTok. That means any transaction would need to win the approval of officials in China and the U.S., a challenging proposition as Chinese leaders have been critical of Trump's effort to force a sale of the company.

Trump's executive order declared TikTok a national security threat due to its alleged ties to the Chinese government and barred the company from transactions in the U.S. starting Sept. 20. A follow-up executive order gave TikTok's Chinese parent company ByteDance 90 days to sell its U.S. business — a deal that would require Trump's approval.

In late August, China’s Ministry of Commerce added artificial intelligence technologies to an export controls list, casting doubt about whether the government must green light the sale of TikTok to a foreign company. ByteDance said it would "strictly comply" with the new Chinese rules.

The president's chief economic adviser, Larry Kudlow, told POLITICO on Aug. 27 that the administration had no preference for a TikTok buyer, so long as data from U.S. users doesn't flow to Beijing. Trump himself also appeared flexible so long as the Treasury Department is "well compensated" in the deal.

"I guess Microsoft wants it and so does Oracle, and probably so do other people, but they have to also make sure the United States is well compensated because we’re the ones making it possible," the president told reporters at an event in Yuma, Ariz., in mid-August.

Trump did lend a boost to Oracle's bid at the time, calling it a "great company" that "would be certainly somebody that could handle it." Oracle's Chair Larry Ellison hosted a high-dollar fundraiser for Trump in February and Oracle executives have been close advisers to his administration even when other tech giants shied away.

Microsoft has cultivated its own positive relationship with the Trump administration, despite high-profile disagreements over issues like immigration and the environment. CEO Satya Nadella spoke with Trump directly in the days before he issued the TikTok executive order, helping to convince the president a sale would be better than an outright ban.

Other companies reportedly interested in the app included Google's parent Alphabet, Twitter and the Japanese multinational SoftBank, although preliminary negotiations with those firms fell flat.

TikTok has become a social media phenomenon that has only grown in popularity during coronavirus self isolation. The company recently said it counts 100 million monthly active users in the U.S. who generate a trove of lucrative personal data on the internet habits of, mostly young, consumers.

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