Oracle Seeks a Partnership with Walmart, TikTok and ByteDance in the Cloud
By: Paul Dykewicz,
President Trump, aware that Oracle seeks a partnership with Walmart, TikTok and ByteDance in the cloud, has been adamant about wanting U.S. ownership of TikTok, a video sharing service that administration officials are concerned would give China’s government access to the personal data of U.S. users. Technology solutions provider Oracle (NYSE:ORCL), of Redwood Shores, California, added multinational retail giant Walmart (NYSE:WMT), of Bentonville, Arkansas, to a proposed TikTok ownership group that is pursuing Trump administration approval.
Both Oracle and Walmart are dividend payers and unquestioned leaders in their respective industries that could offer immense capabilities to TikTok’s operations. Oracle, with a 1.64% dividend yield, valued at a consensus forward price-to-earnings (P/E) ratio of 14.29, and Walmart, offering a 1.58% dividend yield and trading at a consensus forward P/E of 27.17, would boost TikTok’s U.S. ownership by taking minority stakes in the currently China-owned app.
Chart courtesy of www.stockcharts.com.
Oracle Seeks a Partnership with Walmart, TikTok and ByteDance in the Cloud, Despite Headwinds
But such an alliance will require further concessions and negotiations for TikTok to link with such powerful new U.S. partners. TikTok, a unit of ByteDance Ltd., could benefit greatly from strategic partners to spur its growth internationally and its acceptance in the United States and other countries that are wary of the Chinese government’s tentacles for gathering intelligence about its own citizens and foreigners alike.
The Chinese Communist Party (CCP) has demonstrated the “means and motives” to use apps such as TikTok and WeChat to threaten the national security, foreign policy and the economy of the United States, said William Ross, the U.S. Secretary of Commerce. Under his leadership, the Commerce Department announced prohibitions on Friday, Sept. 18, to protect users in the United States by eliminating access to both applications and significantly reducing their functionality.
“President Trump will do everything in his power to guarantee our national security and protect Americans from the threats of the Chinese Communist Party,” Ross said in a statement. “At the President’s direction, we have taken significant action to combat China’s malicious collection of American citizens’ personal data, while promoting our national values, democratic rules-based norms and aggressive enforcement of U.S. laws and regulations.”
Oracle Seeks a Partnership with Walmart, TikTok and ByteDance in the Cloud but Needs Others
Walmart became a new entrant in the proposed alliance after word emerged that Oracle only would gain a minority stake in TikTok and become its “technology partner,” falling well short of the Trump administration’s threshold. Oracle’s involvement would be critical to TikTok continuing to operate in the United States, but it requires Trump administration support to ensure the technology company can protect the data of American users of the video chatting service.
Chart courtesy of www.stockcharts.com.
ByteDance reportedly is planning a U.S. initial public offering of TikTok Global, a proposed new company that will operate the video app, if the proposed deal gains U.S. government approval. But proposals during the past week failed to meet the requirements of the Trump administration. Thus, the Commerce Department announced a ban of the following starting Sept. 20:
- Distribution or maintenance of the WeChat or TikTok mobile applications, code or application updates through a U.S. online mobile application store;
- The provision of services through the WeChat mobile application for the purpose of transferring funds or processing payments within the United States.
As of Sept. 20 for WeChat and Nov. 12 for TikTok, the Commerce Department banned:
- Any provision of internet hosting services enabling the functioning or optimization of the mobile application in the United States;
- Content delivery network services enabling the functioning or optimization of the mobile application in the United States;
- Directly contracting or arranging internet transit or peering services allowing the function or optimization of the mobile application in America;
- Any use of the mobile application’s code, functions or services to operate software or services developed and/or accessible within the United States.
Venerable Oracle Seeks a Partnership with Walmart, TikTok and ByteDance in the Cloud
For a potential TikTok savior in the United States such as Oracle, any role in the growing social media application would be a significant extension of its existing business and create buzz for the Silicon Valley stalwart. It might have seemed preposterous years ago to imagine a company called ByteDance, owning another known as TikTok, and partnering with venerable software behemoth Oracle, but it could happen if the companies can structure the deal in a way to satisfy U.S. and Chinese regulators.
The alliance, which would move TikTok’s headquarters to California from China, seems designed to profit from cloud computing that offers on-demand availability of data storage and other capabilities, without direct action from the user. Still unclear is whether the partnership would end the security threat to the United States that the data TikTok collects from U.S. consumers could be shared with the Chinese government.
Six Republican senators, Marco Rubio, Roger Wicker, Dan Sullivan, Thom Tillis, Rick Scott and John Cornyn, sent a letter to President Trump on Sept. 16 calling for the rejection of any partnership that will retain links to ByteDance or other Chinese-controlled entities due to national security concerns.
“A partial sale, or trusted partnership deal, is insufficient in achieving the goals of protecting Americans and U.S. interests from the severe risks detailed in [an Aug. 14] Executive order,” the senators wrote. “Any deal between an American company and ByteDance must ensure that TikTok’s U.S. operations, data and algorithms are entirely outside the control of ByteDance or any Chinese-state directed actors, including any entity that can be compelled by Chinese law to turn over or access U.S. consumer data. As reported, the proposed partnership agreement between Oracle and TikTok leaves significant unresolved national security issues, and we expect the Administration to keep Congress fully informed as you evaluate this potential agreement.”
Oracle Seeks an Unusual Partnership with Walmart, TikTok and ByteDance
“The deal is Oracle’s attempt to become a major player in providing cloud computing services,” said Bob Carlson, chairman of the Board of Trustees of Virginia’s Fairfax County Employees’ Retirement System with more than $4 billion in assets and head of the Retirement Watch investment newsletter. “Oracle missed the first phase of cloud computing growth. It preferred to continue its successful practice of selling database software to clients and having them buy the hardware to support it.
“Many businesses now want a lot of their operations to be on the cloud, and Oracle hasn’t established itself as a [top] provider of cloud services. If it acquires TikTok, Oracle plans to move TikTok’s operations onto Oracle’s cloud servers. If Oracle is able to provide the services for this high-volume client, that would give it the credibility to compete in that sector against Amazon.com, Google and Microsoft.”
Pension fund Chairman Bob Carlson answers questions from Paul Dykewicz in an interview before social distancing became the norm after the outbreak of COVID-19.
Oracle ideally also would gain access to TikTok’s algorithms and gather some insight into how to improve its software offerings, Carlson continued. Since key details of the proposal have not been publicly disclosed, it is unclear what control of the data and algorithms Oracle may obtain.
Kramer Critiques Oracle’s Partnership with Walmart, TikTok and ByteDance
“Big Tech’s size was a comfort in the early pandemic and now it’s dead weight,” said Hilary Kramer, host of a national radio program called “Millionaire Maker” and head of the GameChangers and Value Authority advisory services. “Microsoft, in particular, looks like it’s going to struggle to regain its recent peak, which is going to be a challenge for the entire sector when you’re dealing with a $1 trillion company. The TikTok deal would have given it the push it needed, but no deal means no push.”
Jim Woods, editor of Successful Investing and Intelligence Report investment newsletters, as well as the Bullseye Stock Trader advisory service, said Oracle Chairman Larry Ellison is a supporter of President Trump and may help to negotiate an agreement with the administration.
“Aside from politics, the deal is likely to be a win-win for both Oracle and TikTok, as it gives the former a hot new app and it gives the latter the tech pedigree in needs to operate in the United States,” Woods said.
Paul Dykewicz interviews Jim Woods before the COVID-19 crisis.
Hope Remains for Oracle’s Partnership with Walmart, TikTok and ByteDance
“From a strategic standpoint, Oracle getting into the social media business makes sense in that their cloud division stands to gain from the deal as a minority partner,” said Bryan Perry, who leads the Cash Machine investment newsletter and the Premium Income, Quick Income Trader, Breakout Profits Alert and Hi-Tech Trader advisory services. “It stands to reason TikTok will provide a growth driver for Oracle at a time when the company needs to generate some new channels of growth.
“Oracle is a low-profile enterprise computing business that gets little if any headlines that move its stock. TikTok is a high-profile business that will keep the key word algorithms busy paying lots of attention to all things TikTok, and hence some things Oracle.”
The proposed partnership also is good publicity, even if TikTok is a “long way from monetizing” its business model through sponsored-advertising expenditures, Perry said. The announcement of the proposal with a trendy social media video service should only enhance the reputation of Oracle, he added.
Paul Dykewicz interviews Bryan Perry at a MoneyShow conference.
President Considers Oracle’s Partnership with Walmart, TikTok and ByteDance
President Trump issued an executive order on Aug. 14 stating TikTok’s data collection allows the Chinese Communist Party access to Americans’ personal and proprietary information — potentially tracking the locations of federal employees and contractors and allowing U.S. adversaries to build dossiers of personal information for purposes of blackmail and corporate espionage. The Department of Homeland Security, Transportation Security Administration and the United States Armed Forces have already banned the use of TikTok on federal government phones.
“TikTok also reportedly censors content that the Chinese Communist Party deems politically sensitive… concerning protests in Hong Kong and China’s treatment of Uyghurs and other Muslim minorities,” according to President Trump’s executive order. “This mobile application also may be used for disinformation campaigns that benefit the Chinese Communist Party, such as when TikTok videos spread debunked conspiracy theories about the origins of the 2019 Novel Coronavirus.”
Plus, India’s government recently banned the use of TikTok and other Chinese mobile applications throughout its country. India’s Ministry of Electronics and Information Technology asserted that the Chinese were “stealing and surreptitiously transmitting users’ data in an unauthorized manner to servers which have locations outside India.”
China’s lack of transparency of the severity of the COVID-19 crisis that originated there has hurt the country’s relationship with U.S. leaders. The global COVID-19 pandemic’s immense human toll includes 30,372,127 cases and 949,486 deaths globally, along with 6,372,127 cases and 198,484 deaths in the United States, as of Sept. 18. America has amassed the most cases and deaths by far of any country.
President Trump gave ByteDance 45 days from his Aug. 14 order to remedy the problem with TikTok but it needs to negotiate further to gain a deal to keep TikTok operating in the United States. However, a willingness to compromise could help DanceByte bridge the gap that currently is blocking Trump administration approval.
Paul Dykewicz, www.pauldykewicz.com, is an accomplished, award-winning journalist who has written for Dow Jones, the Wall Street Journal, Investor’s Business Daily, USA Today, the Journal of Commerce, Seeking Alpha, GuruFocus and other publications and websites. Paul, who can be followed on Twitter @PaulDykewicz, is the editor of StockInvestor.com and DividendInvestor.com, a writer for both websites and a columnist. He further is editorial director of Eagle Financial Publications in Washington, D.C., where he edits monthly investment newsletters, time-sensitive trading alerts, free e-letters and other investment reports. Paul previously served as business editor of Baltimore’s Daily Record newspaper. Paul also is the author of an inspirational book, “Holy Smokes! Golden Guidance from Notre Dame’s Championship Chaplain,” with a foreword by former national championship-winning football coach Lou Holtz. The book is endorsed by Joe Montana, Joe Theismann, Ara Parseghian, “Rocket” Ismail, Reggie Brooks, Dick Vitale and many others.