Oracle emerged late Sunday as the surprise victor in wooing short-term video app TikTok, which is proposing a compromise to the Trump administration that would allow it to potentially keep its current ownership, according to people familiar with the discussions.
Microsoft, which had enlisted Walmart as a partner, has been rejected.
The people, who spoke on condition of anonymity to discuss the deliberations freely, said TikTok recently put forward a proposal to the U.S. government that would allow its Chinese parent company, ByteDance, to retain ownership but outsource cloud management of the data. One of the people said that TikTok chose Oracle as its U.S. "technology partner" Sunday afternoon and that the companies brokered the deal in an attempt to satisfy regulator concerns.
Another possible element of the proposal, according to two of the people, is that ByteDance could move its headquarters from China to alleviate concerns that the parent company would be subject to Chinese laws that require firms, if directed, to share data in their systems with the government.
Treasury Secretary Steven Mnuchin and Commerce Secretary Wilbur Ross, who spoke on the topic late last week, are open to hearing the offer, said a senior administration official, speaking on condition of anonymity because of the matter's sensitivity.
"The deal, if it happens, is going to have to address our underlying national security concerns," the official said.
But a former U.S. official said that while such an approach might address some of the security concerns, "it's well short of a U.S. company taking over the asset and the algorithm, and politically, it would be a massive climb-down from what the president said he was going to accomplish with this."
"It's not a climb-down," the administration official said. Any deal would have to be approved by an interagency group tasked with ensuring that national security concerns are mitigated, the official said. "All the details are not out," the official said.
Oracle's executives have close ties to the president, and the company may be well positioned to meet President Donald Trump's expectations after he took an active role in raising concerns about TikTok. The deal probably would involve Oracle, a business software giant best known for selling database technology to corporations to help run their operations, taking a stake in the company, one of the people said.
TikTok has repeatedly insisted that it is not a national security threat and that it does not share U.S. customer information with the Chinese government.
Microsoft and Oracle were bidding for the business, which has surged in popularity, particularly with young users. TikTok had 91.9 million monthly active users in the United States in June, up from 26.7 million in February 2019.
Microsoft said in a blog post Sunday that its offer to acquire TikTok's U.S. operations was rejected. Microsoft was the first to confirm that it was courting TikTok this summer as Trump threatened to ban the app over national security concerns.
"We are confident our proposal would have been good for TikTok's users, while protecting national security interests," Microsoft said in its post. "To do this, we would have made significant changes to ensure the service met the highest standards for security, privacy, online safety, and combating disinformation, and we made these principles clear in our August statement."
Walmart had joined Microsoft's bid for TikTok.
Oracle and TikTok declined to comment. The White House did not have an immediate comment.