Tags: Alibaba | Revenue | Estimates | Spending

Alibaba Revenue Misses Estimates as Ma Boosts Mobile Spending

Thursday, 29 January 2015 07:58 AM

Alibaba Group Holding Ltd. sales missed estimates as founder Jack Ma spent more money to attract customers on mobile phones. Shares fell in premarket trading.

Revenue was 26.2 billion yuan in the third quarter, compared with the 27.6 billion-yuan average of 25 estimates, the Hangzhou-based company said in a statement. Net income fell 28 percent to 5.98 billion yuan ($964 million) because of compensation expenses and a one-time charge. That compared with the 8.8 billion-yuan average of 19 analyst estimates compiled by Bloomberg.

Ma is investing in shopping apps and promoting Alibaba’s platforms to reach a target of working with more than 10 million small businesses outside China. After September’s initial public offering and a record 57.1 billion yuan in transactions during a Nov. 11 promotion, Alibaba faces a decelerating Chinese economy and scathing criticism from the government for alleged lax oversight of its websites.

“The revenue increase was much lower than people expected,” said You Na, an analyst at ICBC International Research Ltd. in Hong Kong. “As more merchants start advertising on its mobile apps, revenue growth could slow as ad space and the fee it charges will be lower than what they charge for on desktops.”

Shares of Alibaba fell 8 percent in pre-market trading in New York. The shares have gained more than 40 percent since the company sold stock at $68 apiece in its September IPO, raising a record $25 billion.

‘Credibility Crisis’

Alibaba, which connects consumers and businesses across its platforms, has a “credibility crisis” fueled by its failure to crack down on shady merchants, counterfeit goods, bribery and misleading promotions, the Chinese government said Wednesday.

The report by the State Administration for Industry & Commerce accused Alibaba of allowing merchants to operate without required business licenses, to run unauthorized stores that co-opt famous brands and sell fake wine and handbags.

“Alibaba not only faces the biggest credibility crisis since its establishment, it also casts a bad influence for other Internet operators trying to operate legally,” the report said.

The company responded by saying its Taobao Marketplace is improving its technology and procedures to counter fakes, and it decided to file a complaint against the SAIC official who oversaw a meeting with Alibaba representatives in July to discuss the claims.

IPO Prospectus

Alibaba said in its IPO prospectus there were allegations in the past, and likely would be in the future, that the company’s platforms were selling goods that were counterfeit or infringed on other copyrights including music.

“The development of this incident would spook investors,” Li Muzhi, a Hong Kong-based analyst at Arete Research Service LLP, said in an e-mail. “The government is not backing down by the defiant rebuttal.”

Investors backed Alibaba’s IPO on its ability to expand globally with shopping platforms Taobao, Tmall.com and AliExpress just 15 years after being founded in Ma’s apartment. The company competes with Tencent Holdings Ltd. and Baidu Inc. for the attentions of 527 million Chinese who access the Internet from mobile devices.

Ma said this month in Davos, Switzerland, that he wants Alibaba to serve 2 billion customers globally and 10 million small businesses outside China. AliExpress was founded in April 2010 and already is the top online shopping site in Russia and Brazil, markets where it currently has no employees.

Hollywood Visit

As the company expands its core business of e-commerce, it’s also adding other investments such as finance and entertainment content. The company offers high-definition movies and TV shows through its set-top boxes and has a minority stake in online video site Youku Tudou Inc.

Ma visited Hollywood in October to learn about movie studios as he said China’s film industry needed great cultural products.

Alibaba showed interest in partnering with Sony Corp. on movie franchises including “Ghostbusters” and considered investing in “Pixels,” a 3-D computer-animated comedy starring Adam Sandler, e-mails revealed by Sony hackers showed.

Zhejiang Ant Small & Micro Financial Services Group Co., the financial affiliate that includes online payment system Alipay, is expanding in the U.S. and Russia.

Alipay has 17.9 million active users overseas in more than 100 countries and is accepted by 2,000 merchants, Sabrina Peng, vice president for Alibaba’s finance arm’s international business, said in October.

Ma said in October that Alibaba may cooperate with Apple Inc. for mobile payment services.

In September, the finance business won approval to jointly set up a non-state owned bank in China. The bank could start operations as early as May, the official Xinhua News Agency reported, citing Ant Financial Vice President Yu Shengfa.

One of Alibaba’s biggest shareholders, Yahoo! Inc., on Tuesday announced a tax-free spinoff of its $40 billion stake. The deal will put Yahoo’s holding into a newly registered firm called SpinCo, with shares distributed to existing Yahoo shareholders.

© Copyright 2018 Bloomberg News. All rights reserved.

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Alibaba Group Holding Ltd. sales missed estimates as founder Jack Ma spent more money to attract customers on mobile phones.
Alibaba, Revenue, Estimates, Spending
Thursday, 29 January 2015 07:58 AM
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