Wall Street might find the idea of
buying TikTok illogical, but at least one pundit has publicly endorsed the idea.
Asked on Tuesday about the Financial Times story asserting that Oracle (ticker: ORCL) has been discussing making a bid for the streaming short-video company, President Donald Trump said that “Oracle is a great company and I think its owner is a tremendous guy, a tremendous person. I think that Oracle would be certainly somebody that could handle it.”
The “tremendous person” in question is Oracle founder and chairman Larry Ellison, a Trump supporter who hosted a fundraiser for the president’s reelection campaign earlier this year at his home in Rancho Mirage, Calif., near Palm Springs.
This all started with President Trump, of course. The Trump administration has threatened to shut down TikTok in the U.S. unless the business is sold to an American company.
(MSFT) is widely believed to be the lead bidder, and has acknowledged holding talks with TikTok’s China-based parent, ByteDance. There also have been reports about a potential TikTok combination with
(TWTR), although that combination would require some creative financing given that the speculated price hovers around the same size as Twitter’s current market cap of about $30 billion.
The Financial Times reported Tuesday that Oracle is “seriously considering” buying the app from ByteDance. The article reports that Oracle is working with a group of investors that already own a stake in ByteDance, including Sequoia Capital and General Atlantic. TikTok, Oracle, Sequoia and General Atlantic have all declined to comment on the report.
Oracle has no consumer-facing businesses, and never has. Neither does the company have any experience with ad-supported businesses. Like Oracle, Microsoft has a large enterprise software business—but Microsoft also has consumer businesses, like Xbox hardware and software, and it sells advertising for its Bing search engine and other services. Also, an Oracle deal could pose financing issues. Oracle has a little over $70 billion in debt, against $43 billion in cash and short-term investments.
In a research note Wednesday, JMP Securities analyst Patrick Walravens notes that while TikTok is “far removed” from Oracle’s core business, Ellison does have some history of making surprising, impulsive moves. In 2009, the company stunned investors with its $7.4 billion acquisition of Sun Microsystems, outbidding
That deal shocked the Street, given Oracle’s long focus on software rather than hardware, although Sun had key software assets as well, like the Java programming language and the Solaris operating system.
In retrospect, Walravens believes the Sun deal was a mistake. “As things turned out, it is our opinion that Sun ended up distracting Oracle from the much larger trend of cloud computing,” he writes. “Our view is that this acquisition contributed to Oracle being very late to the cloud infrastructure game and ceding share of this explosive market to
Web Services, Microsoft Azure, and Google Cloud.“
In another example of Ellison’s impulsive management style, Walravens points to Ellison’s 2010 decision to hire his friend Mark Hurd as co-president one month after Hurd had been forced out as the CEO of Hewlett-Packard.
Walravens notes that TikTok in May 2019 reportedly signed a three-year deal with Alphabet’s Google Cloud to spend at least $800 million on cloud services. Adding TikTok to the Oracle Cloud would certainly advance Oracle’s push to be considered a viable competitor to Amazon, Microsoft, and Google in the public cloud market. Walravens notes that Oracle won
(ZM) as a customer in April 2020 as demand for its services spiked amid the Covid-19 pandemic. As Walravens notes, Ellison spoke about the Zoom win on a recent earnings call that underlined the company’s determination to make a mark in the public cloud segment.
“I think a bunch of people were shocked that Zoom picked Oracle,” Ellison said. “Zoom—I think Zoom was shocked also. I think Zoom was shocked when they looked at the results after they moved their application to Oracle. And we were faster, much faster, and we were much less expensive and we were more secure. So we think as people compare our cloud, our infrastructure, our second-generation infrastructure, to AWS and Azure and the rest, they’re going to pick our cloud.”
Oracle on Wednesday is up 2.3%, to $56.29. Microsoft is little changed at $211.
Write to Eric J. Savitz at [email protected]