Microsoft is not in the race for the US business of the China-controlled video platform. Oracle is now in pole position and presents Donald Trump with a dilemma.
After Microsoft throws in the towel, Oracle is expected to join the video platform Tiktok.
The fate of the short video platform's operations Tiktok – at least those in the United States – will likely be decided this week. After the American software company Microsoft announced on Sunday that it would not resume the activity Tiktok In Chinese-controlled Bytedance America, all eyes are on Oracle. The Redwood, Calif.-based hardware and software group confirmed Monday that it will be the app's technology partner. Tiktok U.S..
Retail giant Walmart, which originally wanted to do something with Microsoft, also weighed in. They are always interested in investing in Tiktok and continue discussions with Bytedance management and other interested parties. It is known that any transaction must address all regulatory concerns and all national security concerns, he said in a briefly cryptic statement.
US Treasury Secretary Steven Mnuchin told CNBC that his department received a proposal over the weekend for a partnership between the owners of Tiktok and Oracle, which the Interdepartmental Committee on Foreign Investment in the United States (CFIUS), which he led, will now review. CFIUS then makes a recommendation to President Trump. A decision is expected by September 20. Mnuchin told the TV station that, from the point of view of the American authorities, the security of software, data and phones must be guaranteed within the framework of such a partnership.
How come the American authorities play such an important role in this matter? They fear that the personal data of American users of Tiktok are extracted from the Chinese state and used for purposes hostile to security policy. At the same time, the algorithm, which serves video after video to users who reveal their interests using the app, is considered the technological jewel in the crown. Therefore, the US government intervened via CFIUS and investigated the transaction that led to Bytedance's takeover of Musical.ly (now Tiktok) In 2017.
Washington is attempting the transaction by arguing that the Chinese takeover of the Musical.ly platform, which was then largely controlled by American investors, had not been properly reported to American authorities in 2017 and had therefore not been verified by CFIUS as to its compatibility with national security interests. 2017 to be reversed. In other words, Bytedance was asked to resell the American activities of Tiktok in America.
At CFIUS, which does not appear publicly, the ministries of finance, foreign affairs, defense, justice, trade, energy and the ministry of internal security as well as the office of the trade commissioner and the White House are pictured. The office of the director of the national intelligence service and the Ministry of Labor are also members of CFIUS. Last year, 231 deals were reviewed, almost as many as in 2017 and 2018. Chinese investors were involved in 25 of them, after 60 and 55 in the previous two years. Chinese investor interest in taking over US companies has declined dramatically due to trade tensions.
The ultimatum expires on Tuesday
It's unclear how strict the U.S. government's deadline for such a transaction actually is. Trump had repeatedly called for the closure of Tiktok in the United States if the platform was not sold to an American company before September 15. Bytedance's order of August 6 then gave 45 days to conclude a transaction. Whether a deal will actually be reached this week is an open question as it is unclear what partnership Oracle is aiming for. American media, citing informed circles, assume that Oracle will not take control of the algorithm on which the platform is based.
The Chinese government recently tightened export controls on tech products, making it virtually impossible to sell the algorithm Tiktok – the heart of the application – abroad. For Microsoft, however, adopting the algorithm was key to securing the use of the application Tiktok and associated data flow to the United States and to protect it from access by the Chinese regime. Microsoft said on Sunday that its proposal would have met all security requirements and that much had been invested to meet the highest standards for security, privacy and protection against misinformation.
Trump has a good relationship with Oracle
How Oracle wants to solve algorithm management Tiktok should now be the subject of controversial discussions. Finance Minister Mnuchin only said that there would be an intensive exchange with Oracle on the technical side in the coming days. But with President Trump having the final say, other factors will also play a role. The president had already expressed his confidence in Oracle in mid-August. Oracle was a big company with a “huge” (“terrific”) man at the helm, he said at the time.
Trump is referring to Oracle co-founder Larry Ellison. Ellison also hosted an event at his residence this year to raise money for Trump's re-election. Oracle's chief operating officer, Safra Catz, also served on the executive committee of the team that prepared the transition to the Trump presidency in 2016. It remains to be seen whether the political proximity of Oracle's string-pullers will actually put the president in a moderate position for a transaction which will only result in a "partnership" instead of a direct takeover of the operations of Tiktok.
Other open questions concern placement fees and jobs. Ultimately, American taxpayers in particular should benefit from a deal, Trump is well known. Part of the purchase price of Tiktok must therefore be paid to the US Treasury, in the form of commission. That's because the government makes the transaction possible in the first place, Trump claims. And Treasury Secretary Mnuchin said Monday that as part of the partnership with Oracle, Tiktok would be created as a global company based in the United States, which would mean 20 new jobs. Tiktok currently employs only 1 people in the United States.
