Oracle Corp. reportedly has beaten Microsoft Corp. in a bidding war for the U.S. operations of TikTok, but in a catch, the deal may not include the sale of the popular short-video app.

The Wall Street Journal, quoting a person familiar with the deal, said today that Oracle is set to be announced as TikTok’s “trusted tech partner” in the U.S. But the deal won’t be an outright sale of TikTok U.S. operations by parent company ByteDance Ltd.

Update: Oracle also confirmed the deal Monday. “Oracle confirms Secretary Mnuchin’s statement that it is part of the proposal submitted by ByteDance to the Treasury Department over the weekend in which Oracle will serve as the trusted technology provider,” the company said in a statement. “Oracle has a 40-year track record providing secure, highly performant technology solutions.”

Exactly what the arrangement means in practice is unknown, however, though speculation suggests that Oracle might either run or assist in the running to TikTok using its technology in the U.S. while ByteDance maintains some or all of the ownership of the app in the U.S.

The fact that apparently there has not been a full acquisition creates its own issues given that an executive order signed by President Trump Aug. 6 gave the company 45 days to divest TikTik in the U.S. or face being banned. A follow-up order gave ByteDance an extended period of 90 days to divest its U.S. operations, out to Nov. 12.

Whatever form the deal takes, it may yet find favor with the administration. Trump endorsed Oracle’s bid for TikTok Aug. 18 with the administration and Oracle having a favorable relationship. Oracle co-founder and Chief Technology Officer Larry Ellison is a rare Trump supporter among the tech elite while Oracle Chief Executive Officer Safra Catz served on the Trump transition team and was reported as a possible candidate to become Trump’s national security adviser in 2018.

The news that Oracle looks set for a deal with TikTok came tonight after Microsoft had issued a statement earlier in the day that it had been informed by ByteDance that its bid had not been successful.

“We are confident our proposal would have been good for TikTok’s users, while protecting national security interests,” Microsoft said. “To do this, we would have made significant changes to ensure the service met the highest standards for security, privacy, online safety, and combatting disinformation, and we made these principles clear in our August statement.”

The potential form of the deal with Oracle is further complicated given a report from the South China Morning Post that referenced a source briefed on discussions, who said any deal will not involve the sale or transfer of the algorithm behind TikTok.

“The company [ByteDance] will not hand out source code to any U.S, buyer, but the technology team of TikTok in the U.S. can develop a new algorithm,” the source said, adding that “the car can be sold, but not the engine.”

That could suggest perhaps a licensing deal for the brand in the U.S. with Oracle being able to design its own algorithm. That said, algorithms don’t fall from trees. Oracle would have to design its own algorithm, and that would take time to implement. Given the national security concerns that need to be addressed for a deal to be approved by the Trump administration, it may be time Oracle doesn’t have.

“This announcement highlights the growing schism between the U.S. and China-controlled internet,” said Nucleus Research analyst Daniel Elman.. China already has a separate internet for users in mainland China – this could extend outward to other countries in China’s sphere of influence and eventually accelerate the complete split between U.S. and China internet assets and properties.”

The potential pairing of enterprise software giant Oracle and TikTok has always struck some observers as odd, but the form the deal could take might bolster the case for Oracle to make the deal. Patrick Moorhead, president and principal analyst at Moor Insights & Strategy, noted in a tweet tonight that TikTok needs a trusted U.S. data partner, and Oracle is experienced at that, while Oracle needs larger cloud customers, which TikTok — along with any recent new customer, Zoom Inc. — could help provide.

“With another high-traffic, high-volume user like TikTok on the cloud, it demonstrates legitimate enterprise-grade capability and scale, and could lead other enterprise players to consider Oracle over some more entrenched providers,” Elman said.

With reporting from Robert Hof

Photo: Aaron Yoo/Flickr