'Partnership Better Than Acquisition': Analysts React To Oracle-TikTok Deal

Oracle Corporation ORCL shares were up 5% on Monday after the company confirmed a deal with TikTok parent company ByteDance to become the company’s “trusted technology provider.” The new deal between TikTok and Oracle comes after Microsoft Corporation MSFT said Sunday that ByteDance had rejected its buyout offer for TikTok.

National Security Concerns: On Monday, U.S. Treasury Secretary Steven Mnuchin said he will be reviewing the proposed deal between ByteDance and Oracle this week.

“I will just say from our standpoint, we’ll need to make sure that the code is, one, secure, Americans’ data is secure, that the phones are secure and we’ll be looking to have discussions with Oracle over the next few days with our technical teams,” Mnuchin said.

President Donald Trump has been extremely critical of TikTok and its Chinese parent company. In August, Trump issued an executive order requiring ByteDance to either sell, spin off or shut down TikTok in the U.S. due to national security concerns.

Microsoft had reportedly teamed up with Walmart Inc WMT to make an outright bid to buy TikTok. ByteDance was reportedly initially seeking a $30 billion valuation for TikTok.

Details of the new deal between ByteDance and Oracle have not been released, but Trump has recently encouraged a deal between the two companies.

"I think Oracle is a great company and I think its owner is a tremendous guy, a tremendous person," Trump said in August following initial reports that Oracle was interested in TikTok.

Voices From The Street: On Monday, Bank of America analyst Kash Rangan said a partnership with TikTok is even better for Oracle from a financial standpoint than a buyout.

“In our view, Oracle could potentially monetize Tiktok to $2bn+ in revenues if it were to double the number of users to 150mn across the US, Canada, Australia, and New Zealand at monetization of $15/user given typically higher monetization across the US and Western countries, using Facebook and YouTube peer comparisons,” Rangan wrote in a note.

In a statement, Microsoft said it believes its offer would have been both good for TikTok users and strong on national security, but Wedbush analyst Daniel Ives said Microsoft and ByteDance ran into a deal-breaker.

“We believe Microsoft would only buy TikTok WITH its core algorithm, which the Chinese government and ByteDance was not willing to budge,” Ives said.

Bank of America has a Neutral rating and $65 price target for Oracle. Wedbush has an Outperform rating and $260 target for Microsoft.

Benzinga’s Take: Given Trump’s personal relationship with Oracle co-founder Larry Ellison, it’s likely his administration will approve the deal. Investors will now await details of the partnership to be disclosed that could shed some light on the ultimate financial impact of the deal.

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