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Oracle beats out Microsoft in bid for TikTok

Oracle released a statement saying that it would be entering a partnership with TikTok, beating out bidders Microsoft and Walmart. This comes as the U.S. Treasury Department announced will be reviewing the deal. Yahoo Finance’s Dan Roberts joins The Final Round panel to discuss.

Video Transcript

MYLES UDLAND: All right, welcome back to "The Final Round" here on Yahoo Finance. Myles Udland with you in New York. Well, a story we've been covering now for almost two months is the saga with TikTok, what would happen after it was, I guess, reportedly forced to sell itself based on a request made by the president, and it wasn't exactly clear how this would resolve. And today, it seems like there is something like resolution. Oracle coming out today and saying that they are now TikTok's trusted technology partner here in the US.

Which, Dan Roberts, does not mean that TikTok is being sold to Oracle, but the request that basically a US company, I don't know, be involved or be the caretaker, however you want to phrase this, have a hand in TikTok's business and make it not so clearly an arm of the Chinese government. It seems that that is now where we're at. And-- and I guess I would ask, is this the end of this story to you or just sort of maybe a-- a middle, you know, interlude of sorts?

DAN ROBERTS: Well, it's maybe not the end, Myles, but an unsatisfying resolution, and that's if it goes through. Let's make sure we say, as-- as you caveated just now, this does not mean that TikTok's US operations have been sold to Oracle. That's incorrect. And in addition, the idea of a partnership, which is how the companies are framing it, still has to be approved by the White House and by-- and by certain committees. So it's a proposal for now, and it still has to be approved.

The idea that it's a partnership instead of a sale, in some ways you would think that's unsatisfying. But arguably, based on what some analysts are saying, it's kind of the only way that it made sense for Oracle. And-- and, you know, if you look at it from Microsoft's perspective, Microsoft clearly wanted a full sale. I mean, Microsoft wanted control of the algorithm and the data. All you really get with the partnership is political capital.

And if you remember over the last few weeks, when it started to look like the bidding process was coming down to three big names-- Oracle, Microsoft, and then Walmart-- everyone on this show kept discussing none of those names is really an obvious fit for TikTok. You know, we can talk in each case about why, but Oracle almost sort of the least obvious of the three. You know, Oracle doesn't have a hand in data-- I'm sorry, not-- in content or in social media really in any way, shape, or form. What it is doing is it's in a battle for cloud supremacy with other companies.

And I think that, you know, you look at the fact that Microsoft won that big Jedi contract. I don't think it's, you know, too presumptive to think that Larry Ellison, who, of course, is a friend of President Trump and a political donor of President Trump-- he held a fundraiser for Trump in February-- I don't think it's going too far to think that, you know, you could say the biggest motivation for Oracle and for Ellison is just the political capital of saying, oh, look, we came in here, and we're helping the government by being the partner.

Dan Ives, the analyst with Wedbush, I just spoke to him on the phone about the deal. And he said to his mind, Oracle will be behaving like a big brother here, just kind of a steward of the app in the US and making sure that there's no backdoor to Beijing, but it doesn't own anything. It certainly doesn't really help Oracle's business to have this partnership with Oracle-- with TikTok, but there's the political capital.

I think that's what you have to assume is-- is the real motivation here. And interestingly, we should mention that Reuters still reporting that Walmart in some way, shape, or form would like to get in on the deal. Maybe that-- you know, maybe that means approaching Oracle and saying, hmm, we'll do an investment and you let us in as a partner too. But I guess this sounds like the end of it from Microsoft's perspective.

MELODY HAHM: Well, and, Dan, to your point about the Reuters reporting, that originally came from [INAUDIBLE], which is a Chinese publication. Then Bloomberg started reporting it, then now Reuters picking it up. But essentially, there is some sort of e-commerce relationship. And to your point, partnership is the best way to phrase this because it is still very nebulous and very vague as to what the sort of equity share would even look like.

But I was on this program two, three weeks ago talking about how I think Walmart actually is a very good fit in many ways. And I think our own Brian Sozzi did write a piece about this as well talking about the very specific, you know, cash balance that Walmart has, the ability to make it sort of a seamless experience for tweens to think that shopping at Walmart is cool again. There was this period of time when those $10 jeans were trending on Walmart specifically with the TikTok audience.

So just thinking about the different tie-ups that TikTok could have precisely because Oracle does not have the consumer-facing side, I think could be a really sort of interesting creative conglomerate here. I do want to point out, in addition to Oracle's political capital, let's keep in mind that Oracle had teamed up with Sequoia and General Atlantic to potentially have a trifecta sort of deal.

Both General Atlantic and Sequoia had board seats on ByteDance. They have a very strong relationship with the Trump administration. So the ability to sort of come at it from three angles, it's not just on Larry Ellison or Safra Catz's shoulders, is also a huge boon potentially to this going through. I want to read a statement that TikTok did share with Yahoo Finance.

They do say, "We can confirm that we've submitted a proposal to the Treasury Department, which we believe would resolve the administration's security concerns." Let's keep in mind, guys, today is September 14. The so-called "deadline" for this was supposed to be tomorrow, September 15. Over the weekend, Trump did not remember the actual deadline for-- for the deal that he had supposedly been pressuring. So that's a whole different issue that I'm not quite sure the accountability component is there.

And then one final point that I want to add is that the "South China Morning Post" did report over the weekend that TikTok's algorithm is simply not for sale. What that means is, the-- the crown jewel, the point of TikTok, the reason that TikTok is so valuable is because of it is-- it's insanely accurate algorithm, right? You can fall into a hole for several hours because the content is so tailor-made, so curated to your own interests and your own dabbling.

So the fact that that's not up for grabs and that's the bottom line of this deal and all these negotiations maybe proves that Microsoft was not willing to be flexible on that metric perhaps. So lots of moving pieces here. Myles, to your earlier question, I think this is actually just the beginning. I don't anticipate that there will be anything in writing, finalized, or confirmed for weeks to come.

MYLES UDLAND: Melody Hahm, you mentioned Brian Sozzi. And on this program when you mention someone's name, they do magically pop up. Anyhow, Brian Sozzi, welcome to the program.

BRIAN SOZZI: Thanks for having me today.

MYLES UDLAND: Melody mentioned the Walmart tie-in with TikTok. I know you wrote about that, thought about that. You see this news cross from Oracle earlier today. Just kind of your view on-- on where this stands.

BRIAN SOZZI: Yeah, Melody hit the home run on that. She's absolutely right. For Walmart, it's all about going digital, ever digital with Walmart CEO Doug McMillon. He has acquired growth. He's acquired online retailers. He's moved to same-day delivery. You saw our story from Julia La Roche this morning. Now they're testing on drones. The bottom line is this asset, even with some kind of tie-up, would give them a competitive advantage, you don't see a Target, you don't see a Kroger.

Ultimately, I think they will turn this, if-- if they do get involved, into a digital shopping center. It's where everything is going. And if they miss out on TikTok, look for talks to start up with Snapchat. It's essentially the same model to a certain degree. Different certainly TikTok and Snapchat, but why not Snapchat? Why not make a play for Snapchat? Why not make a play for Twitter? I think it puts those companies in play.

MYLES UDLAND: All right, so in your view then I guess, Walmart's next natural acquisition of sorts, they-- they went kind of the route of, you know, these vertically integrated brands that have had quite a few challenges. Dan Roberts has written about that a lot. You view social media as a-- as a new frontier for them, I guess.

BRIAN SOZZI: It's all about data. Data right now for Walmart is a lifeblood. It's not a new $2 steak they sell in the freezer section. It's all good. That is what it is. It's not opening up new stores. It's taking the large amount of capital they have on the balance sheet and access low-cost credit and finding data and learning more about its consumers and targeting more things to its consumers, and I think that's where they're-- I think that's where they're going to go.

DAN ROBERTS: And-- and then, guys, I'll give Sozzi this on why Walmart makes sense in a very simple element. Forget everything else. How about having influencers do sponsored promo videos and TikToks involving Walmart. I mean, imagine every influencer on TikTok doing their stupid dances in the parking lot of a Walmart, and then imagine the great affiliate links that Walmart can get to its e-commerce site.

MYLES UDLAND: Yes, the little--

BRIAN SOZZI: And watch me and you, Dan, take these guys, and-- and men and female, inside the stores doing these TikTok videos.

MYLES UDLAND: Yeah, as you say, soon they'll be a-- a watermark on all the TikTok videos, not just with your handle, but with, you know, "filmed at Walmart in x place." And-- and that'll be, of course, part of a great new beautiful sponsorship integration that everybody will certainly love.