KEY POINTS

  • Both Oracle and Microsoft offer cloud infrastructure that TikTok might use for data storage.
  • TikTok has offered to place its global headquarters in the U.S. and create tens of thousands of jobs
  • ByteDance will retain a majority stake in TikTok’s U.S. operations

Updated, Sept. 17, 1 p.m.: The Treasury Department, ByteDance, and Oracle have reached a tentative deal that would allow Oracle to become TikTok's "trusted technology provider" in the U.S., according to Business Insider and other sources. Reports indicate the deal does not meet President Donald Trump's early demands that TikTok's Chinese parent company sell off its US operations.

Original story begins here: 

President Donald Trump said Wednesday he was not yet prepared to approve the proposed deal that would make Oracle (ORCL) a technology provider of TikTok, the video-sharing app owned by China’s ByteDance.

Over the weekend the Beijing-based ByteDance submitted a proposal related to the deal to the U.S. Treasury Department. ByteDance chose to do business with Oracle, rejecting overtures from Microsoft (MSFT). Both Oracle and Microsoft offer cloud infrastructure that TikTok might use for data storage.

TikTok, wildly popular with youth, has more than 700 million monthly users around the world, including 100 million in the U.S.

Treasury Secretary Steven Mnuchin told CNBC that TikTok has offered to place its global headquarters in the U.S. and create tens of thousands of jobs as a means of appeasing Trump.

But Trump, who said he will look at details of the deal on Thursday morning, cited that national security concerns of the U.S. must be assuaged by the deal. He was also upset that the Treasury Department cannot legally receive any form of payment for brokering the transaction.

“Amazingly I find that you’re not allowed to do that [take payment],” Trump told reporters. “I said, ‘What kind of a thing is this?’ If they’re willing to make big payments to the government, they’re not allowed because there’s no way of doing that from a – there’s no legal path to do that. How foolish can we be? So we’re looking into that right now.”

Perhaps Trump’s biggest objection was that ByteDance will retain a majority stake in TikTok’s U.S. operations, while Oracle would only receive a minority stake. This would appear to violate Trump’s August executive order,  which demanded ByteDance relinquish all control of TikTok’s U.S. business. That order set a deadline for ByteDance to divest its TikTok operations in the U.S. or face a ban in the country. (That sale deadline has since been extended to Nov. 12)

Critics fear that under the proposed deal with Oracle, ByteDance could still have control over data collected on American users of the app – data that would presumably be transferred to China’s Communist government.

“Well, we’re looking into that,” Trump said. “From the standpoint of ByteDance we don’t like that. I mean, just conceptually I can tell you I don’t like that. If that's the case, I'm not going to be happy with that."

Trump has close ties to Oracle – the company’s cofounder and executive chairman Larry Ellison supports the president and even hosted a fundraiser for him at his California home. Oracle’s Chief Executive Officer Safra Catz served on Trump’s transition team following the 2016 election.

Weifeng Zhong, a senior research fellow on China issues at the Mercatus Center at George Mason University, warned that if ByteDance retains the right to veto any decisions on data storage by Oracle, it would not protect national security.

"The ball is now really in the court of the [Trump] administration," Zhong told NPR. "But if Oracle doesn't have the final say, I would be very skeptical about this deal. If the Administration turns down this proposal, it'd better be because it fails to adequately protect user data.”

Meanwhile, some top Republicans have also expressed their opposition to Oracle's deal with TikTok since it does not give a U.S. company full ownership.

"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,"  a group of Republicans led by Sen. Marco Rubio of Florida wrote in a letter to Trump. "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.”