CEOs of major companies including Oracle Corp. and Palantir Technologies recently met with senators on Capitol Hill to advocate for US support of Israel during its invasion of Gaza. At the same time, they sought assistance in freeing hostages held by Hamas. However, Oracle faces potential financial setbacks if a ban is imposed on TikTok in the US, as the software company provides cloud infrastructure for the popular app. President Joe Biden signed a bill in April demanding that TikTok’s Chinese owner, ByteDance, sell the platform within a specified timeframe to avoid a ban. The ongoing ownership concerns regarding TikTok’s ties to China have been a point of contention since 2020, prompting negotiations with Microsoft and eventually leading to a deal with Oracle to provide cloud services to keep the app operational in the US.
The initiative, known as Project Texas, aims to maintain TikTok services for American users on Oracle’s cloud infrastructure within the country. Oracle CEO Safra Catz has expressed a positive relationship with TikTok and the company’s role in providing these services. TikTok has voiced concerns about the recent legislation targeting its ownership and has raised potential First Amendment issues with the requirement for its sale. Despite interest from investors like Frank McCourt and Steven Mnuchin, no acquisition agreement for TikTok has been reached.
Oracle has not disclosed the financial specifics of its ties to TikTok, but analysts estimate that the app’s annual US sales could result in significant spending on cloud infrastructure. If TikTok generates $16 billion in US sales annually, the company could be investing a substantial percentage of revenue on cloud services from Oracle. With Oracle’s cloud infrastructure revenue for the fiscal year at $6.9 billion, the potential impact of losing TikTok as a client could be significant for the software company.
As the situation surrounding TikTok’s ownership and potential sale continues to unfold, Oracle remains in a precarious position regarding its financial ties to the app. The outcome of TikTok’s negotiations with potential buyers and the implications of the US legislation on its operations will likely influence Oracle’s financial performance moving forward. Investors are closely monitoring developments related to TikTok’s future, as any significant changes could have a direct impact on Oracle’s revenue and earnings.
Article Source
https://www.cnbc.com/amp/2024/06/24/oracle-warns-that-a-tiktok-ban-would-hurt-business.html
