Rumors flying everywhere. Outside of China, the rumors are about Yahoo buying Alibaba, But the Chinese press seems to believe that Alibaba is “acquiring” Yahoo! China.
More details from Pacific Epoch
Chinese business to business website Alibaba will transfer a 35 percent stake of the company to Yahoo and in return gain control of Yahoo China’s core businesses, reports Sina quoting an inside source. The deal will not involve cash and Alibaba CEO Jack Ma might be appointed Yahoo China president, said the source. Softbank, one of Alibaba’s investors, is also participating in the negotiations. Yahoo’s China businesses currently include a Chinese Internet portal, the search engine Yisou, online auction website 1pai (a joint venture with Sina (Nasdaq: SINA)) and instant messaging service Yahoo Messenger.
This sounds more plausible given that Zhou Hongyi, Founder of 3721 & ex-President of Yahoo China, left or was forced out of Yahoo! China recently. Yahoo currently believes a local Chinese is best suited to run its business China and is actively seeking an replacement. Furthermore, Jack Ma has notoriously big ego ambitions so this will definitely be something he’ll be interested in. A minority stake by Yahoo! will also not preclude an eventual IPO (although not likely) which will keep the VC’s as well as Jack happy on that front too. Ofcourse, does Yahoo! want to create another Yahoo! Japan situation where its essentially a separate business with its own agendas. Ceding the fastest growing internet market to a minority owned subsidiary is not exactly the smartest thing to do for Yahoo’s global ambitions. Thus, if this moves forward, I’m sure Yahoo will include a buyout clause where it is allowed to buy Alibaba at a certain premium to its expected IPO pricing to take it whole thing off market and back into the fold. (You gotta admire Jack Ma’s negotiation skills to turn a potential acquisition by Yahoo to the current configuration where he gets the best of both worlds - money, position, visibility)
Expect Alibaba to move aggressively into other markets (portal, gaming, IM, etc) creating another huge mess. Remember Alibaba is certainly not afraid of being an new entrant in a market with entrenched players, think Taobao vs. EachNet.
Thanks for the link, Will. Never came across your blog, but I like so I’ll add it to my blogroll.
Comment by Bernard Moon — August 9, 2005 @ 11:53 am
Nice analysis. I agree with you that Alibaba/Yahoo will be a major force in China. It will be interesting to see which new areas they enter/expand in the coming months.
Comment by James — August 14, 2005 @ 2:37 am
Bernard, James, thanks for note . . .
Comment by Administrator — August 15, 2005 @ 1:14 am