tech

ByteDance, Oracle at loggerheads over terms of TikTok agreement

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By Echo Wang and Yingzhi Yang

ByteDance and Oracle Corp issued conflicting statements on Monday over the terms of an agreement they reached with the White House over the weekend to allow TikTok to continue to operate in the United States, casting doubt on President Donald Trump's preliminary blessing of the deal.

China's ByteDance was racing to avoid a crackdown on its popular short-video app after the U.S. Commerce Department said on Friday it would block new downloads and updates to the app. U.S. officials had expressed concern that the personal data of as many as 100 million Americans that use the app was being passed on to China's Communist Party government.

A successful deal would allow Trump to drop his threat of shutting down TikTok and avoid alienating its army of young users ahead of the Nov 3 U.S. election.

ByteDance said on Monday that it will own 80% of TikTok Global, a newly created U.S. company that will own most of the app's operations worldwide. ByteDance added that TikTok Global will become its subsidiary.

Oracle and Walmart Inc, which have agreed to take stakes in TikTok Global of 12.5% and 7.5% respectively, had said on Saturday that majority ownership of TikTok would be in American hands. On Monday, Oracle said ByteDance's ownership of TikTok would be distributed to ByteDance's investors, and that the Beijing-based firm would have no stake in TikTok Global.

Trump signed an executive order on Aug. 14 giving ByteDance 90 days to relinquish ownership of TikTok. Oracle's account of the deal would mean that ByteDance would be complying with that order, while ByteDance's account would represent a policy reversal for Trump.

Trump did not comment on the conflicting accounts of the agreement on Monday, but said the deal was "working its way through" after he granted his preliminary approval.

"If we can save (TikTok), we will save it, and if we can't we will cut it off. We have to have total security," Trump told reporters before departing the White House.

The corporate governance arrangement that the companies have disclosed for TikTok Global does not award total control to Oracle and Walmart. Walmart Chief Executive Doug McMillon would be one of five directors on TikTok Global's board, the companies have said. Others would include ByteDance founder Zhang Yiming, and the heads of ByteDance's two top investors, General Atlantic and Sequoia Capital. The fifth board director has yet to be named.

The current plan for TikTok Global does not involve any transfer of algorithms or technologies, and Oracle will be able to inspect TikTok U.S.'s source code, ByteDance said on Monday. This is akin to U.S. companies such as Microsoft Corp sharing their source code with Chinese technology experts, ByteDance added. Oracle and Walmart have said all of TikTok's technology will be transferred to TikTok Global.

The Commerce Department postponed a ban on downloads and apps to the TikTok app that was due to take effect on Sunday by one week, to give the companies time to finalize the deal.

The Committee on Foreign Investment in the United States, a U.S. government panel that reviews deals for potential national security risks, has been overseeing the negotiations.

Some sources close to the deal have sought to reconcile the discrepancies by pointing out that 41% of ByteDance is owned by U.S. investors, so by counting this indirect ownership TikTok Global would be majority owned by U.S. parties. One of the sources said the deal with Oracle and Walmart values TikTok Global at more than $50 billion.

ByteDance on Monday also confirmed plans for an initial public offering of TikTok Global. Oracle has said this will happen in less than 12 months on a U.S. stock exchange.

EDUCATION FUND

ByteDance also said a $5 billion payment of taxes TikTok Global will make to the U.S. Treasury is based on estimated income and other taxes the company will need to pay over the next few years, and has nothing to do with the deal reached with Oracle and Walmart.

Trump last week had said there would be a $5 billion U.S. education fund as part of the deal, but ByteDance has said it was not aware of this. Walmart, Oracle and some ByteDance investors said they would sponsor an educational initiative for online courses for children in the suburbs and inner cities.

ByteDance owning the majority of TikTok Global and the algorithms means that ByteDance is "not out of the game" and has avoided the worst-case scenario, China's state-run newspaper Global Times said in an editorial published on Sunday.

But on Monday, Global Times editor-in-chief Hu Xijin tweeted: "Based on what I know, Beijing won't approve current agreement between ByteDance, TikTok's parent company, and Oracle, Walmart, because the agreement would endanger China's national security, interests and dignity."

China's foreign ministry did not immediately respond to a request for comment.

© Thomson Reuters 2020.

©2020 GPlusMedia Inc.

3 Comments
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Trump is trying to put an end to TicToc because he is afraid that China is gathering information about American kids who put their infantile videos there. I know there are skeptics who will say that TicToc is about the level of Trump's understanding of the world. But face the facts. The whole reason for Trump's decoupling with China is he and many others realize that the US can no longer compete with China. Now Chinese companies can't buy US electronics, but that will just motivate China to make the stuff itself. It may take 5 or 10 years, but China will succeed because it plays a long game. The US is the past, China is the future.

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The whole reason for Trump's decoupling with China is he and many others realize that the US can no longer compete with China. Now Chinese companies can't buy US electronics, but that will just motivate China to make the stuff itself.

China has to either buy or steal technology because it doesn't have the cadre of experienced senior engineers and scientists who run the big tech development projects or who come up with advanced manufactured goods that one finds in the best western companies. Mao and the Red Guards either killed or ran off a whole generation of educated Chinese teachers and scientists who today should be that senior cadre of scientists and engineers in China. They are simply not there. We know this because the Red Guards did it to our family so we know this first hand. On top of that while Chinese universities graduate lots of engineers, a Chinese university operates like everything else in China. Money talks and if you want good grades your parents need to cough up "red envelops" for the professors. The main reason my own wife did not attend a Chinese university was after the Red Guards ran her mother out of the classroom and off to the countryside for "re-education" they didn't begin to have enough money to bribe the admissions department to get her in and then bribe the professors for good grades. She was a grown adult before the authorities would even let her return to her mother's original home city of Shanghai from their exile in the countryside. You have to have a residency permit to legally live anywhere in China. China can't do it on its own. They have to steal western technology to get ahead and their young seek an education in the west because it is a much better education where grades do not depend on bribes. The west had every reason to cut China off from their best technologies. In fact the west would be supremely foolish not to.

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@desert tortoise And yet, Huawei, for example, has more than 5,000 US patents. Somebody must be doing something right.

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