Oracle's Possible TikTok Acquisition Would Be Poor Fit

On Aug. 18, Oracle ORCL was reported to be added to the mix of potential buyers for TikTok’s North American, Australian, and New Zealand operations. By throwing its hat in the ring, Oracle is in the company of Microsoft and Twitter, all potential buyers of the ByteDance social media platform, which would need to close on a deal within less than 90 days (as per U.S. presidential orders). We think such an acquisition would be a poor fit for Oracle’s business, which has been dependably focused on the enterprise software market. While some sources have cited synergies in using Oracle security solutions to ensure TikTok’s platform is secure, we think such synergies would be extremely slim, especially when contrasted with more valuable benefits Microsoft MSFT or Twitter TWTR could offer.

While we think the contrast between a social media platform and an enterprise software giant would lead to few synergies, if Oracle purchased TikTok at a moderate enough valuation, it could serve to help diversify the company’s revenue for the better. Oracle’s compound annual growth rate over the last five years is 1%. However, we think Oracle would need to be careful in acquiring TikTok, treating the asset in a hands-off manner, in order to avoid being value destructive--such as through destroying company culture. Still, strategically, we think Microsoft and Twitter are better fits for TikTok, as Morningstar Analyst Dan Romanoff details in his note, “Microsoft Looking to Acquire U.S. Operations of TikTok.” At Microsoft, we could see TikTok increasing consumer engagement, perhaps tied into Xbox Live. On the flip side, Twitter would be a natural acquirer of the TikTok operations, given its social media expertise and ability to leverage its advertising ecosystem further with another social media platform. While we think Oracle can’t compete with the value other bidders bring to the table, we’re closely monitoring the situation that could result in an awkward product portfolio for Oracle.

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