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Oracle of the United States (ORCL-US) and China’s short video app TikTok announced on the 19th that the two companies had reached a basic consensus on cooperation. TikTok does not include international business in the Chinese market. After the spin-off, a new company will be established, Oracle will invest 12.5% and Wal-Mart (WMT-US) will invest 7.5%, bringing the total stake to 20%.
Before the news was published, US President Trump also stated that he “agrees in principle” with the cooperation case. The original measures by the US Department of Commerce to ban TikTok app downloads on September 20 have been postponed until September 27. Since the case for cooperation must be recognized by the Chinese side, this amounts to extending the negotiation period by one week and forcing China to make concessions.
Oracle and Wal-Mart decided to invest in the recently established company “TikTok Global”, 80% of the shares of the company will also be held by ByteDance, and both parties also agreed on the future initial public offering. User data will be stored on Oracle’s cloud server to comply with US government security requirements.
As for analyst views, Evercore’s Kirk Materne recently pointed out in an investigation that the question about Oracle is when will the company’s cloud business growth appear. In this regard, one should wait for the contribution of TikTok. He mentioned that the cost of the TikTok cloud service is comparable to that of Snap, which launched “Snapchat”; Oracle is estimated to generate between US $ 200 million and US $ 300 million in revenue each year, with annual revenues increasing by 0.5% to 1%. This figure is just an estimate of TikTok’s assets in the US, and the overall result may be higher than this figure. Oracle’s confidence in the public cloud market also has the opportunity to improve.
Ray Wang, chief analyst at Constellation Research, also provided positive comments on this cooperative case. He believes that Oracle can sit on TikTok users, which means that the company has won the fierce competition for workload. In addition, the combination of application data and Oracle ODC (Oracle Data Cloud) can also be developed in the direction of Ad Network. Oracle can also benefit from diplomatic relations between the United States and China.
Ray Wang believes that this time the cooperation between Oracle and TikTok, be it in the cloud service, the ad network or the trade war in geopolitics, has won a beautiful victory. He mentioned that the top 20 companies in advertising networks, portals, creative optimization, commercial platforms and advertising agencies use all Oracle ODM (Oracle Data Marketplace) database services. With this cooperation with TikTok, Oracle’s advantage in the market will be further consolidated.
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