Oracle’s partnership with TikTok’s U.S. ops ‘doesn’t solve any problems’ but provides a ‘huge uptick’: cybersecurity expert

On Monday, treasury secretary Steven Mnuchin confirmed that the White House received Oracle’s proposal for TikTok and that the Trump administration will review it this week. Karim Hijazi, Prevailion CEO, joins Yahoo Finance’s The First Trade with Alexis Christoforous and Brian Sozzi to discuss. Hijazi also weighs in on the potential hacking risks in the lead-up to the 2020 U.S. presidential election.

Video Transcript

ALEXIS CHRISTOFOROUS: Treasury Secretary Steven Mnuchin confirming at the White House received Oracle's proposal for TikTok and that they're going to be reviewing it this week. For more on that, let's bring in Karim Hijazi. He is the CEO of Prevailion. Karim, good to see you, as always. So what do you think of Oracle coming out of the seeming winner here of this TikTok bid and not a buyout so much as a partnership, from what we're hearing?

KARIM HIJAZI: Yeah, good to see you, Alexis. Yeah, it's interesting. It's another turn of events that I don't know that I would have predicted. Oracle's not the de facto standard for a company you'd think that would be interested in a social media play. But you know, now that it's in play, it's not a terribly surprising thing that they may have some really interesting things planned. They don't have any anything like Microsoft had, you know, with LinkedIn and games, so this is a nice play for them.

Although, the deal, as you've indicated, isn't really satisfying from the outset what the Trump administration has asked for, which is control of the data that could potentially get into the communist party's hands in China. So it is a little concerning and interesting. So I'm not quite sure what the play is here. There is no apparent outset or delivery of the algorithms, of ByteDance or TikTok, to Oracle in this deal. It looks like just simply some sort of partnership. That's the terminology that's being thrown around right now so a lot to be figured out.

BRIAN SOZZI: Karim, in the best case scenario, how does this acquisition-- or not acquisition, this partnership-- change the next five years for Oracle. Does it help them sell more cloud services?

KARIM HIJAZI: It does. It's certainly-- you know, if you look at it from purely a consumption and bandwidth and, you know, collection and harvesting and cloud computing play, it's an amazing opportunity for Oracle. Think about the terabytes of data that they'll effectively be able to hold onto and bill for, effectively. So I do think it's a huge, huge uptick. And we saw it in the futures, I think, with Oracle, too. Everyone kind of saw that as another influx of data going into Oracle's cloud computing environment.

Again, I think it's all speculation. We're not quite sure how Oracle is going to be working with TikTok. But you know, that's really one area where they could win. And if they go take it the next step, as I mentioned a little earlier, where they get into the actual social media game, just like some of these other big giants, you know, it's one that never even came up in our last few conversations. So it's an interesting play for them, not to mention the ties with the Trump administration and Oracle as well. It's pretty interesting.

ALEXIS CHRISTOFOROUS: Yeah, I mean, what do you think the likelihood is that the White House signs off on this? If President Trump's biggest concern was security, with regard to TikTok, you know, users' information not being given to the Chinese government, do you think Oracle satisfies that for them?

KARIM HIJAZI: So the juxtaposition is what the Chinese media is saying versus what we're hearing and what we're talking about right now, which is we're saying, hey, there's a partnership. There appears to be some level of control over the TikTok environment. China is saying something very different. They're saying no sale, no algorithm, no source code, which by definition, from a tactical perspective, doesn't solve any of the problems at all because you're not able to control what the app's collecting and effectively where the app is sending data to.

The beauty-- the curse and the blessing of the internet both is that it can be sent to do-- two different places, right? So if they're going to continue to send the data to what they call their main server cluster for the US that is in Singapore while sending it to the Oracle environment, it doesn't solve any of these problems at all. So to answer your question, there's a lot of hurdles to get over, I think, to actually-- when people start to check the-- tick the boxes and say, we've actually achieved what we went out to do, I don't know that it'll pass a sniff test as it stands today.

ALEXIS CHRISTOFOROUS: And maybe Walmart, we shouldn't count them out here. Because Walmart coming out in a statement today saying they're still in talks with ByteDance. I mean, they're not a software company-- a tech company in a way that Microsoft and Oracle are. So could we still see Walmart be part of any partnership deal, and what role would they play?

KARIM HIJAZI: Yeah, I mean, you know, Walmart has its big nemesis of Amazon, so they're doing everything they can to sort of compete in that area. And social media, by design, it's the perfect marketing mechanism. We see this with Chinese apps like WeChat. It's tightly integrated with social commerce. So I wouldn't be surprised if they make some seriously interesting plays there, as a competitive move there.

But I wouldn't be terribly surprised if we see some sort of consortium situation happen where Oracle handles the collection and databasing of some of the information while Walmart handles the sort of social, apps side of it if they can get there. That'd be really interesting. That's total guessing on my part, though.

BRIAN SOZZI: Karim, I felt for years, you know, Oracle has been able to fly under the radar. It sells its cloud services, puts up disappointing earnings growth, sales growth. Larry Ellison does his yachting. But doesn't this deal or partnership now put Oracle on par, let's say, with a Google and a Facebook in getting scrutinized for how much data it holds and how it uses it?

KARIM HIJAZI: Yeah, absolutely. I mean, the big thing that shocked me seeing this was Oracle doesn't kind of hit the radar for anything consumer. They're a B2B play. They've always been a very big business play, databases, management, cloud services for businesses. Most consumers don't even know who Oracle is, to your point. It's an under-the-radar type of environment.

So this does put them in the crosshairs, effectively, of people looking at them going, wow, you're taking on something that couldn't be more whimsical and sort of consumer-focused with teenagers all over TikTok. I mean, it's a really strange combination. But from a data perspective, it does make sense. But from a marketing and leveraging it as a capability, it is going to be new to them if they're going to take that on.

ALEXIS CHRISTOFOROUS: Since we have you, Karim, I want to ask a quick question about the 2020 election and hacking and deep fakes. They continue to create a lot of buzz. How big a problem is this as we near the November 3 election?

KARIM HIJAZI: It's a huge problem. You know, every day, these deep fakes are coming out where they're incredibly powerful. Unfortunately, even though they're not perfect, people will look at things at first glance and make an assumption of what they're seeing and hearing. And now deep fakes are moving into audio. They're changing voices around. So it's not just simply the visuals. It's the voices. So you could technically hear you're a

Radio broadcast that never happened, in theory, at this point, too. So that combination is extremely dangerous, and it feeds this whole disinformation campaign risk that we've all been worried about and talking about. Yeah, I mean, every year, this gets more and more complicated and difficult. So I absolutely think that, at this point, the nation-state actors that have an intention to disrupt this election have a lot of tools at their disposal.