(Updated to add further analyst reaction and context, beginning
in the fifth paragraph.)
By Juro Osawa and Amir Efrati
Alibaba Group Holding Ltd., a privately held Chinese e-commerce
company gearing up for an initial public offering, saw its net
profit triple in the first quarter, according to major shareholder
Yahoo Inc. (YHOO)
For the first three months through March, Alibaba's earnings
rose to $669 million from $220 million a year earlier, on revenue
that jumped 71% to $1.38 billion, according to a slide in Yahoo's
earnings presentation Tuesday. Yahoo, which owns about 24% of
Alibaba, records the impact from Alibaba one quarter in
arrears.
The earnings growth comes amid rising expectations among bankers
and investors for the company's much-anticipated IPO, which could
value the company at about $70 billion based on analysts'
estimates. Alibaba Chief Executive Jonathan Lu said in an interview
this month that the company was ready for an IPO, even though it
hadn't decided when or where to list its shares.
Alibaba's profit margin growth accelerated, increasing to 48.4%
in the first quarter from 35% in the fourth quarter of last year,
said Sameet Sinha, a stock analyst at B. Riley & Co. "I don't
think anybody was expecting that; that's a massive acceleration,"
he said.
Some analysts say Alibaba's hefty and accelerating profit margin
could give it a greater ability to compete against rivals that have
much lower margins. Alibaba could thus make bigger investments in
its products, as well as make acquisitions or take equity stakes in
other companies, and still maintain impressive margins.
Alibaba already has announced a series of deals lately. On
Tuesday, Alibaba said it had invested in travel website Qyer.com,
without disclosing the deal's value. The move followed two other
investments in the past few months that were aimed to strengthen
the company's mobile-based business.
In April, Alibaba agreed to buy an 18% stake in Sina Corp.'s
(SINA) Twitter-like Weibo microblogging business for $586 million.
In May, Alibaba agreed to buy a 28% stake in mapping software firm
AutoNavi Holding Ltd. (AMAP) for $294 million.
The first-quarter results from Alibaba would suggest that the
company is on track to generate more annual revenue than Yahoo. For
its part, Yahoo said Tuesday that its revenue excluding traffic
acquisition costs slid 0.9% in the second quarter to $1.07
billion.
Alibaba, founded by Jack Ma in 1999, began as a trading site
connecting Chinese suppliers with overseas buyers, but the company
has since expanded with shopping websites for consumers such as
Taobao and Tmall. It makes its money through advertising,
commissions and fees for services offered to sellers.
Taobao and Tmall together surpassed $160 billion in transactions
last year and accounted for the majority of the group's revenue.
Unlike Amazon.com Inc. (AMZN), Alibaba doesn't sell products but
instead operates websites where small merchants and major brands
can sell their goods.
George Stahl contributed to this report.
Write to Juro Osawa at juro.osawa@dowjones.com
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