(Bloomberg Opinion) — The competition over which U.S. technology company will win control of TikTok is heating up, and it just took a strange turn.
Late Monday, the Financial Times reported that Oracle Corp. has held talks with Beijing-based ByteDance Ltd. to acquire TikTok’s operations in the U.S., Canada, Australia and New Zealand, putting the business-software developer in the running for the short-video platform alongside Microsoft Corp. and Twitter Inc. According to the report, Oracle is partnering with current ByteDance investors General Atlantic and Sequoia Capital for the potential deal.
The new development follows President Donald Trump’s latest edict on Friday that ordered ByteDance to divest its U.S. operations within 90 days, citing national security concerns. An earlier executive order from Trump restricts U.S. residents from doing business with the company as of late September.
Certainly, Oracle — with a market value of $170 billion — has the wherewithal to be a serious contender for TikTok. It can easily afford the tens of billions that will likely be required to buy the popular app. And with Oracle’s extensive history in enterprise database software, the U.S. can be assured that the company would be able to safeguard TikTok’s user data, relieving any security and privacy concerns. Beyond those two points, though, an Oracle-TikTok combination makes little sense.
Oracle has virtually no experience in the consumer internet and social-media app businesses. Further, there is little corporate synergy between TikTok’s burgeoning offering for brand advertisers and the software company’s enterprise-focused sales channels. Frankly, it seems like a desperate attempt at relevancy as Oracle has struggled amid the industry’s secular shift to cloud computing from traditional on-premise deployments. To illustrate, during a time when revenue at many cloud-software companies is growing at heady double-digit rates, Oracle is shrinking, with its sales down 6% versus in its latest reported quarter from a year earlier. While Oracle is trying to market itself as a leading cloud player, the numbers show it is still a legacy software vendor at its core.
The truth is, TikTok is a better fit for the other public bidders. Last month, I wrote how Microsoft may be the best match, noting that its advertising business anchored by the Bing search engine could make TikTok a powerful third competitor against the two dominant internet ad players, Google parent Alphabet Inc. and Facebook Inc. In addition, Microsoft has other successful consumer offerings such as its Xbox gaming business and talented machine-learning engineers to maintain TikTok’s best-in-class algorithms. On a pure dollars and cents level, its Microsoft’s game to lose as well. The company is worth nearly $1.6 trillion and has the ability to top any bid from Oracle, if it so desires. And because Microsoft has similar businesses, where it can cross-sell and cross-promote TikTok, the company probably can value TikTok higher versus the enterprise-focused Oracle.
As for Twitter, my colleague Tim Culpan wrote last week that buying TikTok would help increase the social media company’s scale and reach to younger viewers, improving the company’s ability to sell to advertisers. And of course, Twitter has specialized industry knowledge and long experience in social media.
There may be another cross-current in the mix, though. It is reported Oracle co-founder Larry Ellison is one of few technology executives who has supported President Trump politically. Some have speculated Ellison may be able to leverage his close relationship with the White House to get his company a better deal. But at the end of the day, even if Oracle can win out, that doesn’t mean it should go for it. From my perspective, an Oracle-TikTok combination is just too weird to work.
This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.
Tae Kim is a Bloomberg Opinion columnist covering technology. He previously covered technology for Barron’s, following an earlier career as an equity analyst.
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