Oracle is not a consumer company. “Oracle provides products and services that address enterprise information technology (IT) environments,” is the first line in its annual report. The word “enterprise,” a business term for business entities, as opposed to people, appears 34 times in the report. “Consumer” appears three times, none of them in conjunction with Oracle’s own business.Oracle
Among other things, Oracle is an also-ran in the business of cloud-computing services, a market dominated by Amazon Web Services (AWS) and Microsoft’s Azure service. TikTok’s U.S. business doesn’t generate a ton of revenue yet, but it is a big buyer of cloud services from Google Cloud, another meg-cap contestant in the cloud wars. Oracle, by buying TikTok, would add to its smallish customer list that includes videoconferencing champ Zoom, which also buys from AWS.
Microsoft, though not a consumer champion—see Bing, MSN, and so on—has a longstanding relationship with consumers, especially with its Xbox gaming and Windows software businesses. It also sees an opportunity to transfer TikTok’s cloud usage to Azure.
Getting back to how a banker sees this, imagine you are private-equity-slash-VC firms KKR, General Atlantic, SoftBank, Hillhouse Capital, and Sequoia, the big investors in TikTok owner ByteDance. The president of the United States has bizarrely forced ByteDance to sell, Microsoft has emerged as the favored bidder, and you’re about to be forced to accept what Microsoft offers. A banker calls with a great idea: Sell 15 to 20% of TikTok to Oracle, with private-equity investors, including yourselves, owning the rest, and value the company at a higher price than Microsoft. TikTok, under ex-Disney honcho Kevin Mayer, already is set up to run as an independent business, so Oracle’s lack of consumer experience doesn’t matter. Oracle gets the cloud revenue and otherwise minds its own business. And you get a higher price for your forced sale.
My old pal Jim Cramer, now a self-described “Jimmy Chill” who doesn’t care if The New York Times claims his reporting as its own, presented much of this hypothesis on CNBC Monday, though I confirmed elsewhere that this is how Oracle is thinking about it. (Oracle declined to comment.)
It’s an upside-down world where a dealmaker-in-chief helps bidders who are friendly with him (Oracle cofounder Larry Ellison and CEO Safra Catz) in a multi-billion-dollar, cross-border transaction. One constant: It’s good to be a banker.