Oracle stated in its annual report released on Monday that a TikTok ban in the US may negatively impact the company’s operations.
TakeAway Points:
- Oracle stated that a TikTok ban in the US might have a negative impact on earnings.
- President Joe Biden signed a bill in April requiring ByteDance to sell TikTok within nine months, or a year if an extension is granted, in order to prevent the short-video startup from being banned in the United States.
- According to the report, over 120 million people use TikTok in the United States, and Oracle provides cloud infrastructure for the app.
TikTok ban may affect Oracle’s business
A U.S. ban of TikTok might hurt Oracle’s business, the software company acknowledged in its annual report.
In April, President Joe Biden signed a bill demanding that China’s ByteDance sell TikTok in nine months, or one year if an extension is approved, if the short-video company wants to avoid a ban in the U.S. TikTok’s ownership structure has long been a source of tension in the U.S. due to concerns about user data making its way to China.
The report states that Oracle provides cloud infrastructure for TikTok, which has over 150 million users in the U.S.
“If we are unable to provide those services to TikTok, and if we cannot redeploy that capacity in a timely manner, our revenues and profits would be adversely impacted,” Oracle said in its annual report for the fiscal year ended May 31.
U.S Concerns over TikTok
Concern over TikTok and its Chinese ownership dates back to 2020, when Donald Trump, who was then president, pushed for a sale or divestiture of the U.S. assets. That pressure prompted deal talks with Microsoft. Weeks later, Oracle announced that it was part of ByteDance’s proposal to the U.S. Treasury Department to provide cloud services that could help TikTok remain available in the U.S.
TikTok moved forward with an initiative called Project Texas, designed to keep TikTok services for U.S. users running on Oracle cloud infrastructure located inside the country. TikTok said Oracle would also be responsible for compiling the app and delivering it to third-party app stores.
“The one thing I can tell you is we have an excellent relationship with the folks at TikTok,” Oracle CEO Safra Catz said on a 2022 conference call with analysts.
Bill mandates TikTok sale
Following the bipartisan legislation this year targeted at TikTok, and Biden’s signing of the bill mandating its sale, TikTok filed a lawsuit arguing that the law violates First Amendment free speech protections.
According to the report, real estate investor Frank McCourt and former Treasury Secretary Steven Mnuchin have expressed interest in buying TikTok, but no deal has materialized.
Oracle hasn’t disclosed details of its financial ties to TikTok. Evercore analysts estimated in April that if TikTok is generating sales of $16 billion in the U.S. annually, it could be spending 3% to 5% as a percentage of revenue on cloud infrastructure, which would work out to $480 million to $800 million. Oracle’s cloud infrastructure revenue for the fiscal year came to $6.9 billion.
