By Aaron Tilley and Stu Woo
Oracle Corp. co-founder Larry Ellison's pursuit of a deal with
TikTok could win him two prizes at once: a flashy new customer for
his company's lagging cloud-computing business and a victory over a
fierce rival.
Mr. Ellison, 76 years old and chairman of the company, has
reason to be a big fan of Chinese-owned TikTok, a video-sharing app
famously beloved by young people. But first Oracle, TikTok and
their partners have to get a deal done that could return the
business-software company to the center of the tech world.
Mr. Ellison maneuvered Oracle ahead of Microsoft Corp. in the
race to become TikTok's U.S. tech partner, and personally lobbied
President Trump to sign off on a preliminary agreement, people
familiar with the talks said.
Under the current deal terms, Oracle and Walmart Inc. would take
a combined 20% stake in a new U.S.-based TikTok. Oracle would
guarantee the security of U.S. user information to satisfy White
House concerns that China's government might get access to such
data. But the parties, including TikTok's Beijing-based owner,
ByteDance Ltd., are still finalizing their agreement and need
approval from both the U.S. and Chinese governments.
Oracle hasn't said what it would pay for its planned 12.5%
stake, though based on estimates for TikTok's total valuation the
investment could top $7 billion. An initial public offering of
TikTok in the U.S., which the preliminary deal says would happen
within a year, could return some of that money.
Winning the TikTok contest would pay other dividends for Mr.
Ellison, most significantly boosting Oracle's efforts to gain
traction in the hot field of cloud-computing -- which he once
dismissed as a fad.
As he plays catch-up with market leaders Amazon.com Inc. and
Microsoft, Mr. Ellison already has deployed the hardball tactics
for which he's long been known. Oracle over the past few years has
been poaching hundreds of employees from Amazon Web Services, the
online retailer's cloud arm, offering massive salary increases. And
four years ago, Oracle spent around $9 billion on cloud-software
provider NetSuite Inc., its biggest ever acquisition.
Oracle also has been trying to land the kind of high-profile
cloud clients that bring bragging rights as well as big revenue.
This year, it won business from Zoom Video Communications Inc. when
the videoconferencing app needed extra capacity to handle
skyrocketing demand during the pandemic.
After Mr. Trump signaled his backing for Oracle's TikTok
arrangement, the U.S. software company said in a statement its work
with Zoom influenced the outcome.
This summer's drama has also returned the billionaire back to
the center of the action in the tech industry.
One of the world's richest men, Mr. Ellison has long sought to
keep Oracle in the public eye. The company paid for naming rights
to the San Francisco Giants home baseball park and for the Oakland
home of the National Basketball Association's Golden State
Warriors, before they moved to San Francisco. Mr. Ellison himself
sits on the board of one of Silicon Valley's buzziest companies,
Tesla Inc.
But Oracle's core business, database software for companies, is
anything but splashy compared with the businesses belonging to a
younger generation of tech titans such as Facebook Inc.'s Mark
Zuckerberg and Amazon's Jeff Bezos.
"Larry wants to be in the spotlight. It doesn't matter how many
billions it will cost," said Osama Elkady, a longtime Oracle
executive who left in 2013 and now is CEO at data-analytics company
Incorta Inc. And Oracle, he said, has had to show it is taking the
cloud seriously. "This might give them new blood," Mr. Elkady
said.
Oracle declined to make Mr. Ellison available for comment.
A college dropout, Mr. Ellison is among a small group of fabled
tech entrepreneurs who drove the rise of Silicon Valley and changed
how people live and do business. His competitive streak is
legendary. In 2000, Mr. Ellison admitted to hiring private
investigators to look into Microsoft, calling it a "civic duty."
The investigators found Microsoft helped fund companies that
supported Microsoft in a battle with the Justice Department.
Mr. Ellison is an avid sports mogul who had his biggest success
with the America's Cup sailing competition. With a willingness to
both spend money and tussle -- he paid handsomely to lure some of
Australia's and New Zealand's best yachtsmen -- he scored a 2010
victory that returned the trophy to American hands. Mr. Ellison
himself served as crew on board.
He's also passionate about basketball. He has had a hoops court
on his yacht, with a powerboat tailing it to retrieve balls that go
overboard. Mr. Ellison has repeatedly tried to buy a National
Basketball Association franchise, but most recently lost out on the
Los Angeles Clippers to former Microsoft CEO Steve Ballmer in
2014.
TikTok could be Mr. Ellison's revenge, of sorts. Microsoft
earlier this summer was the leading candidate to join with TikTok
to address U.S. national security concerns. Its current CEO, Satya
Nadella, also spoke with Mr. Trump to get the deal done.
The Microsoft deal talks stalled when China imposed export
restrictions on the software that TikTok uses to recommend videos
to users, an algorithm seen as the app's secret sauce. Microsoft
saw that as a deal breaker because it felt it needed control over
the algorithm to address national security concerns, people
familiar with the matter said. That left Mr. Ellison in pole
position.
With a deadline approaching for a deal to head off a partial ban
of TikTok, Mr. Ellison got on the phone with Mr. Trump, for whom he
hosted a fundraiser this year, people familiar with the talks
said.
Mr. Ellison also proposed to Mr. Trump that the companies
establish a $5 billion education fund, an idea the president later
touted.
Soon after, Mr. Trump gave his blessing to a deal that would
make Oracle TikTok's security partner and provide the
cloud-computing services that, analysts estimate, could represent a
multibillion-dollar business over the next few years.
TikTok will further cement Oracle's credentials as one of the
few providers that can satisfy government security concerns, says
Mark Moerdler, a senior research analyst at Bernstein Research.
"This is not commodity cloud computing. Oracle could make good
money on this business."
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Write to Aaron Tilley at aaron.tilley@wsj.com and Stu Woo at
Stu.Woo@wsj.com
(END) Dow Jones Newswires
October 03, 2020 10:14 ET (14:14 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.
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