Oracle and Walmart may save TikTok from turbulence in the cloud, despite the latter’s owner ByteDance making claims Monday, Sept. 21, about owning 80% of a proposed new TikTok Global company in violation of President Trump’s requirements for U.S. control — potentially squandering his approval of the “concept” of a partnership.
TikTok, a unit of China’s ByteDance Ltd., gained a one-week reprieve from incurring a ban of its video chat service in America when President Trump delayed the penalty until Sunday, Sept. 27, to allow time for an acceptable deal with new U.S. ownership to be finalized to remove the threat of national security risks. Without the extension, TikTok’s service could have been banned from the United States starting Sept. 21 by President Trump’s Aug. 14 executive order that set a 45-day deadline for the business to obtain U.S. ownership and safeguards from the Chinese government gaining access to the personal data of 100,000 American users.
President Trump told reporters at the White House on Saturday that U.S. control of the planned new company, TikTok Global, would be able to initiate ways to prevent China’s government from accessing users’ personal data with the latest technology of Oracle. The president, speaking from the White House on Saturday, Sept. 20, called Oracle and Walmart “great American companies” with “genius” leaders that will help the video chat TikTok application become a “brand new company,” if it completes its planned formation of TikTok Global.
New Partners Oracle and Walmart May Save TikTok from Turbulence in the Cloud
Technology solutions provider Oracle (NYSE:ORCL), of Redwood Shores, California, and multinational retail giant Walmart (NYSE:WMT), of Bentonville, Arkansas, announced plans to become strategic investors in TikTok Global with minority stakes of 7.5% and 12.5%, respectively. Oracle will provide cloud computer capabilities to TikTok Global that will be “superior” to anything in the world, President Trump said.
In addition, TikTok Global likely will be based in Texas, ultimately create 50,000 jobs and pay more than $5 billion in new tax dollars for the U.S. Treasury. TikTok Global 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 strategy of gathering private data about its own citizens and foreigners alike.
“[TikTok Global] will have nothing to do with China,” Trump told reporters. “It’ll be totally secure.”
Oracle and Walmart have much to offer investors and the price of both stocks rose on Monday, Sept. 21, after President Trump’s “blessing” of the proposed arrangement when it seemed U.S. ownership of the TikTok application would ensue without further doubt. Oracle and Walmart pay dividends, are unquestioned leaders in their respective industries and could offer TikTok’s operations enhanced capabilities and opportunities as new strategic investors.
Oracle offers a 1.58% dividend yield and a consensus forward price-to-earnings (P/E) ratio of 14.45, while Walmart brings a 1.58% dividend yield and trades at a consensus forward P/E of 27.25. Walmart CEO Doug McMillon would gain one of five seats on the TikTok Global board of directors if the deal is completed. In fact, that board will feature three additional Americans who have yet to be named publicly.
Chart courtesy of www.stockcharts.com.
Despite Risk, Oracle and Walmart May Save TikTok from Turbulence in the Cloud
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. The Commerce Department on Friday, Sept. 18, announced U.S. companies would be banned from providing downloads or updates for the TikTok and WeChat apps after Sunday, Sept 20, but the President later delayed it until Sept. 27 to allow time for the deal to be finalized.
“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.”
The Commerce Department’s move was aimed at blocking access to TikTok and WeChat applications and significantly reducing their functionality in the United States. U.S. companies would have been prevented from providing WeChat with data-hosting services after Sept. 20, except for an order issued on that day in California by U.S. Magistrate Judge Laurel Beeler, who granted a preliminary injunction halting the start of the ban and upholding a motion from users of the Chinese-owned messaging and e-commerce app.
WeChat, owned by Tencent Holdings Ltd., is a provider of mobile payments, messaging, marketing and business communications. Walmart has been using WeChat since 2018 to reach and collect payments from its customers in China.
Giants Oracle and Walmart May Save TikTok from Turbulence in the Cloud
Walmart became a new name in the proposed partnership 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 for U.S. control. Oracle’s involvement would be key to TikTok sustaining and growing its operation in the United States.
Aside from taking an equity stake in the new TikTok Global, Walmart will give the video chat application access to its extensive retail revenue drivers such as Walmart.com, ecommerce marketplace, fulfillment, payment and measurement-as-a-service advertising. However, the Trump administration must be convinced the new U.S. owners will have control of TikTok Global and will be able to protect the data of American users.
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ByteDance is planning a U.S. initial public offering (IPO) of TikTok Global within the next 12 months and a listing on a U.S. stock exchange. After the IPO, U.S. ownership of TikTok Global is expected to increase and continue to grow, according to a joint announcement from Oracle and Walmart.
The two American companies also announced that TikTok Global will control the video chat apps technology and will comply with U.S. laws and privacy regulations. Private data of TikTok users in America will be moved to Oracle’s Generation 2 Cloud data centers that earned President Trump’s praise.
Oracle’s deal to gain a key technology role in the TikTok application will significantly raise the profile of the Silicon Valley stalwart and create buzz in the business world. People might have scoffed years ago that a company called ByteDance, owning another known as TikTok, might partner with software behemoth Oracle, but it could happen if the companies and Walmart can finalize the remaining terms satisfactorily. The alliance would position the revamped entity to profit from cloud computing that allows on-demand availability of data storage and other capabilities, without direct action from a user.
U.S. Senators Urge Rejection of Deal if ByteDance Keeps Ties to TikTok
Six Republican senators, Marco Rubio, Roger Wicker, Dan Sullivan, Thom Tillis, Rick Scott and JohnCornyn, co-signed a letter to President Trump on Sept. 16 calling for the rejection of any partnership that will retain ties to ByteDance or other Chinese-controlled entities due to U.S. 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 the 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.”
Opportunistic Oracle and Walmart May Save TikTok from Turbulence in the Cloud
“The deal is Oracle’s attempt to become a major player in providing cloud computing services,” said Bob Carlson, head of the Retirement Watch investment newsletter and chairman of the Board of Trustees of Virginia’s Fairfax County Employees’ Retirement System with more than $4 billion in assets. “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 exact details of the proposal have not been publicly disclosed, it is uncertain what control of the data and algorithms Oracle may gain, he added.
Stock Gurus See Oracle and Walmart Offering to Rescue TikTok from Turbulence
“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, “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’s public support for President Trump may have aided obtaining the deal’s approval by 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 it needs to operate in the United States,” Woods said.
Paul Dykewicz meets with Jim Woods before the COVID-19 crisis.
Low-profile Oracle and Walmart May Save TikTok from Turbulence in the Cloud
“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 keyword algorithms busy paying lots of attention to all things TikTok, and hence some things Oracle.”
Paul Dykewicz interviews Bryan Perry at a MoneyShow conference.
President May Let Oracle and Walmart Save TikTok from Turbulence in the Cloud
The deal took root after President Trump’s Aug. 14 executive order stating TikTok’s data collection lets the Chinese Communist Party access Americans’ personal and proprietary information — potentially tracking the locations of federal employees and contractors to allow 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 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 use of TikTok and other Chinese mobile applications there. India’s Ministry of Electronics and Information Technology accused the Chinese of “stealing and surreptitiously transmitting users’ data in an unauthorized manner to servers which have locations outside India.”
U.S. COVID-19 Deaths on Track to Top 200,000 Soon
China’s lack of transparency about the initial severity of the COVID-19 crisis that began there has hurt its relationship with President Trump and other U.S. leaders. The global COVID-19 pandemic’s human toll globally includes 31,245,797 cases and 963,693 deaths, as well as 6,856,884 cases and 199,817 deaths in the United States, as of Sept. 22, according to Johns Hopkins University. America has amassed the most cases and deaths by far of any country.
ByteDance’s claim that it will own 80% of the proposed TikTok Global company rather than having controlling interest with its U.S. partners could cause President Trump to kill the deal. If ByteDance instead structures the partnership to proceed, it could gain the strategic, technology and global reach advantages of teaming up with Oracle and Walmart to potentially prosper rather than have its TikTok video chat app banned outright from operating in America.
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.