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TikTok deal will help Oracle 'catch up': analyst

Brian Sozzi
·Editor-at-Large
·3-min read

The ink on the paper for any deal between Oracle (ORCL) and TikTok is far from dry. But that hasn’t stopped Wall Street from speculating on how any tie-up would jump-start long sluggish growth at Oracle.

“Oracle is super late to the cloud. Why the deal [with TikTok] is so important for Oracle — and a great coup for Larry Ellison... number one, it would be a huge cloud deal. Snapchat did a $2 billion cloud [services] deal with Google. TikTok is supposedly paying Google $800 million [for cloud services that would go to Oracle]. Number two, it would be a great reference customer for Oracle, who is behind Amazon and Microsoft and Google in the cloud. This is a way to help them catch up,” said JMP Securities software analyst Pat Walravens on Yahoo Finance’s The First Trade.

To be sure, the fate of TikTok — and Oracle’s bottom line — hangs in the balance.

PARIS, FRANCE - SEPTEMBER 15: In this photo illustration the logo of Chinese media app for creating and sharing short videos TikTok, also known as Douyin is displayed on the screen of a smartphone in front of a TV screen displaying an Oracle logo on September 15, 2020 in Paris, France. US software and hardware manufacturer Oracle Corporation confirmed Monday (September 14th) that it had made a proposal to take over the US operations of the Chinese video-sharing application TikTok, as the US government had announced earlier. The takeover of the American branch of the Chinese social network by an American company is at the heart of a battle between Washington and Beijing. (Photo by Chesnot/Getty Images)
PARIS, FRANCE - SEPTEMBER 15: In this photo illustration the logo of Chinese media app for creating and sharing short videos TikTok, also known as Douyin is displayed on the screen of a smartphone in front of a TV screen displaying an Oracle logo on September 15, 2020 in Paris, France. US software and hardware manufacturer Oracle Corporation confirmed Monday (September 14th) that it had made a proposal to take over the US operations of the Chinese video-sharing application TikTok, as the US government had announced earlier. The takeover of the American branch of the Chinese social network by an American company is at the heart of a battle between Washington and Beijing. (Photo by Chesnot/Getty Images)

Oracle is reportedly nearing a partnership deal with TikTok that will see it own a roughly 20% stake in the company. Walmart will reportedly join in the partnership.

A Walmart spokesperson declined to comment to Yahoo Finance on any deal with Oracle and TikTok.

“Walmart continues to have an interest in a TikTok investment and continues discussions with ByteDance leadership and other interested parties. We know that any approved deal must satisfy all regulatory and national security concerns,” Walmart said last weekend.

It’s unclear if President Trump — who has pushed for the sale of TikTok on national security concerns — will sign off on the deal. A White House spokesperson declined to comment to Yahoo Finance on the timing around any decision by the president.

But the market clearly has made up its mind — it sees TikTok lifting Oracle’s flagging profits. Oracle shares are up 10% over the past month versus the 2% drop in the Nasdaq Composite. Keep in mind Oracle’s stock has badly lagged the tech rally of the last five years (64% gain for Oracle vs. 125% pop for the Nasdaq) in large part due to the company being late in shift to cloud services.

That was again evident in Oracle’s most recent quarter.

Oracle’s fiscal first quarter sales rose a meager 2% year-over-year. For the fiscal year ended May 31, total revenue dropped 6% year-over-year.

Brian Sozzi is an editor-at-large and co-anchor of The First Trade at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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