Oracle’s Potential TikTok Acquisition: A Strategic Expansion or a Diversion from Core Business?

If Oracle (NYSE:ORCL) ends up taking over TikTok, will it be a good thing for the company?

The US has long been keen to get TikTok out of Chinese hands (specifically ByteDance) out of fears the app is a security risk – for the record, we are not saying it is or it isn’t a security, just that there is that perception is there. And talk has been going on for years, only now does it appear to be that something will give.

The Trump administration openly threatened to shut it down, only to backtrack and give it a deadline to come out of Chinese hands. But just how can this happen? One plan has been for Oracle to take control of the operations.

This was a few weeks ago, and there has been silence since then. But no doubt, some solution is being worked on. It is worth considering what such a solution would look like.

 

A Strategic Play or a Diversion?

First, a recap on who Oracle is. Oracle is the world’s largest database management company, providing services through the Cloud and on-premise, although it is the former that is becoming increasingly important.

This is not just because of the rise of the Cloud, but the explosion in data. This company’s software helps businesses manage and organise their data more effectively.

It uses its own technologies to close its books and reports in less than 10 work days. 54% of manual accounting has been eliminated, 97% of bank account transactions are automatically reconciled and 80% of transactions are automated.

So at face value, you can see why Oracle is an ideal candidate to takeover TikTok.

What’s more is that there is already a connection – The existing server infrastructure of TikTok is operated by Oracle on its behalf. So this deal may be perceived as a solution to keep TikTok operating, but perhaps it is also a good opportunity for the Larry Ellison-founded company to broaden its consumer data reach while maintaining its core cloud technology competencies.

The purchase of TikTok would enable Oracle to evolve its cloud services while positioning itself as an industry leader in data security protection during this critical period of heightened Chinese technology company security concerns.

 

Microsoft’s Shadowy Involvement

Microsoft’s involvement in any potential transaction creates further intriguing elements. NPR provides information about Microsoft’s current talks with TikTok but lacks specifics regarding their participation. Microsoft demonstrated its interest in acquiring TikTok when it made previous acquisition attempts in 2020.

 

 

Microsoft, Oracle, and Walmart tried acquiring TikTok in 2020 before the discussions failed. Bill Gates viewed Microsoft’s potential TikTok acquisition as a dangerous situation, which he described as a “poisoned chalice.”

Walmart decided to stay out of current acquisition discussions because it doubted TikTok’s worth. Investors have difficulty assessing whether the platform’s financials match its high acquisition price, raising investment risk.

 

The National Security Angle

National security issues constitute the primary reason behind this business acquisition. Australian lawmakers and their US counterparts have raised concerns about user data being accessible to Chinese authorities through TikTok’s connections. Oracle aims to act as the primary defender of American and international data security by governing TikTok’s algorithm operations and ensuring data management adheres to regulatory standards.

According to NPR, the planned agreement enables Oracle to actively track TikTok’s operations to reduce the risk of unauthorised data access by foreign actors. The acquisition would boost the company’s position as a trusted cloud services provider and create new possibilities for securing government relationships through partnerships.

 

Political Overtones: The Government’s Role in the Acquisition

The proposed acquisition is much more than a business move because politics play a major role in its development. For national security reasons, the White House led negotiations to reduce Chinese ownership through the TikTok acquisition. Former President Donald Trump introduced an executive order giving ByteDance 75 days to sell TikTok while the matter became more pressing.

Trump supported Larry Ellison’s leadership of the Oracle acquisition but later denied any involvement with the company.

 

Strategic Alignment and Growth Opportunities

Oracle investors need to establish whether purchasing TikTok represents an enhancement of the company’s strategic development through acquisition. The acquisition provides multiple attractive advantages to each party involved. Through TikTok’s large international user database, Oracle plans to enhance its cloud infrastructure and strengthen its position in the competitive cloud market.

By managing TikTok’s data arena, Oracle can establish itself as a top player in data protection practices at a time when people worry more about privacy and cybersecurity matters. The shift towards consumer technology products represents a timely opportunity to create new market channels while expanding outside its established enterprise software clientele.

 

Potential Risks and Challenges

The business transition comes with multiple substantial dangers. The acquisition might distract Oracle’s internal focus away from its core enterprise operations and create operational challenges. Moving forward with the complex regulatory environment of TikTok’s China connections requires substantial political navigation efforts alongside costly time investments.

A major challenge stems from the fundamental differences between Oracle’s enterprise roots and TikTok’s social media focus. Oracle faces challenges in sustaining consumer-facing operations after acquiring TikTok while maintaining its enterprise-focused identity.

 

Final Thoughts: A Calculated Gamble or Strategic Evolution?

Oracle’s proposed acquisition of TikTok is perceived to be a solution to keep TikTok running but without China’s influence…but it could be an opportunity for Oracle too.

The discussions show how technology intersects with political changes and data security practices throughout the current digital landscape. The potential acquisition delivers advantages as well as potential threats to investors.

Success would make Oracle emerge as a market leader between enterprise software providers and consumer data and cloud service operators. A failed acquisition attempt may exhaust Oracle’s resources while pulling focus from its main business operations.

During negotiations, investors need to carefully monitor how Oracle manages this upcoming expansion against its current business objectives. This acquisition shift may demonstrate a clever strategic evolution or represent a dangerous diversion from Oracle’s core competency. Only time will tell.

 

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