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The download page for ByteDance Ltd.'s TikTok app is arranged for a photograph on a smartphone in Sydney, New South Wales, Australia, on Monday, Sept. 14, 2020.Brent Lewin | Bloomberg | Getty Images

SINGAPORE — The politics surrounding the future of TikTok's operations in the United States could undermine the need for better understanding and assurances when it comes to protecting user data, a security expert said Thursday.

 

Beijing-based ByteDance, which owns the popular short video sharing app, rejected Microsoft's bid to buy TikTok's U.S. operations and instead chose Oracle to become TikTok's U.S. technology partner. Sources previously told CNBC that Oracle became ByteDance's partner of choice due to the company's close ties to the Trump administration and its willingness to accept a deal where it didn't buy 100% of the assets. 

Political leanings of various parties involved in the potential transaction "further pollutes" concerns around data privacy and security, Marcus Fowler, director of strategic threat at cybersecurity firm Darktrace, said on CNBC's "Squawk Box Asia." Fowler previously worked for the CIA developing global cyber operations and technical strategies. 

"I do worry that any political leanings here could pollute the outcome of what we really want which is better understanding and better assurances with regards to data and security," Fowler said. 

He explained that there needs to be more concrete, transparent policy for how companies should be handling user data, no matter where they sit or what country they are aligned with. 

It remains unclear if the U.S. government will approve a restructuring plan that would still keep TikTok's U.S. business, including the data collected by the app on American users, under ByteDance's control. 

President Donald Trump told reporters on Wednesday he was not ready to approve a proposal from ByteDance and said it must be "100% as far as national security is concerned."  

"Is it if this goes through, well, the rest (of) other countries, other organizations (be) kind of like 'Oh, this is all I need to do to get my company's security practices over the bar, is I just need to align from a political standpoint rather than from a baseline of this is what security and security assurance looks like and this is the level of security I need to have in place in order to reach a bar that is acceptable'," Fowler said. 

VIDEO7:5807:58What is ByteDance?CNBC Explains

The United States has alleged that data collected by the app on American users could be accessed by the Chinese government and may be used for disinformation campaigns. TikTok has denied those allegations and said U.S. user data is stored in the country itself with a backup kept in Singapore.

The White House had imposed a Sept. 20 deadline for ByteDance to come up with a plan to sell the video app's U.S. operations or be banned by Sept. 29. A deal would have to be done by Nov. 12. But Beijing had pushed back on a tentative sale of U.S. assets, saying it would need to approve a deal that involves exporting the lucrative artificial intelligence technology used by TikTok.

Relations between the U.S. and China have deteriorated considerably in recent years due to a trade war and a race to establish dominance in crucial areas of technology including 5G and semiconductors. Washington has targeted Chinese tech companies like Huawei and upped the pressure on the likes of ByteDance and Tencent, making it more difficult for them to operate in the U.S.

— CNBC's Alex Sherman contributed to the report. 

Related Tags
  • Cybersecurity
  • U.S. Economy
  • Internet
  • Technology
  • Donald Trump

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ByteDance says it will keep control of TikTok under deal with Oracle

Chinese tech giant ByteDance said Monday that it would retain control of TikTok under its deal to keep the popular video-sharing app alive in the US.

The Beijing-based firm made the claim in a statement addressing “rumors” that TikTok would become an American-owned company — as ByteDance’s US partners, Oracle and Walmart, said when they announced the deal Saturday.

ByteDance said TikTok Global, a new US-based company set up to run the app in the states, was its “100 [percent] owned subsidiary.” Its ownership will drop to 80 percent after a “small round” of financing before the new company goes public, according to the statement posted on WeChat, a Chinese social media platform.

Walmart and Oracle, however, have said TikTok Global would be “majority owned by American investors,” with the two companies taking a combined 20 percent stake in the newly formed company.

The retailer and the software giant would pay a total of $12 billion for that stake if they agree to the $60 billion valuation ByteDance is seeking for TikTok, Bloomberg News reported Sunday.

But the two US companies said TikTok Global’s American ownership would “increase and continue to grow over time” following its initial public offering on a US stock exchange, which is expected to take place within a year.

Additionally, American investors such as Silicon Valley-based venture firm Sequoia Capital and buyout firm General Atlantic already own about 40 percent of ByteDance, suggesting they would have indirect ownership of TikTok Global.

“Upon creation of TikTok Global, Oracle/Walmart will make their investment and the TikTok Global shares will be distributed to their owners, Americans will be the majority and ByteDance will have no ownership in TikTok Global,” Oracle executive vice president Ken Glueck said in a statement Monday.

ByteDance did not immediately respond to an email seeking more details about TikTok Global’s ownership. But the company said in its statement that it hopes “to reach a cooperation agreement that meets the legal requirements of the United States and China as soon as possible.”

ByteDance’s deal with Oracle and Walmart allowed it to avert President Trump’s threat to ban TikTok in the US, where the app has 100 million users. The Trump administration has expressed concerns that TikTok user data could be shared with the Chinese government, allegations the app has denied.

In its statement, ByteDance said the deal doesn’t involve the transfer of any technologies — such as TikTok’s signature algorithm — though Oracle will be able to review the app’s source code. Oracle and Walmart have said TikTok Global would possess all of TikTok’s technologies.

Walmart did not immediately respond to a request for comment Monday morning. Their stock prices were up 5.1 percent and roughly 1.2 percent in premarket trading Monday as of 7:27 a.m.

With Post Wires

Filed under china ,  deals ,  TikTok ,  walmart ,  9/21/20

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