Alibaba earnings are 'icing on the cake' for Yahoo

Chinese e-commerce giant Alibaba gained $1.4 billion in profit for the fourth quarter of 2013, doubling the amount it made during the same period in 2012.

Chinese e-commerce giant Alibaba gained $1.4 billion in profit for the fourth quarter of 2013, doubling the amount it made during the same period in 2012.

The company also saw a 66% increase in revenue in the period, year-over-year to $3.1 billion.

Yahoo, which owns 24% of Alibaba, revealed the news on Tuesday as part of its own earnings call.

For the first quarter of 2014, Yahoo reported a 1% dip in revenue to $1.13 billion, compared to same period in 2013. Revenue that excludes traffic acquisition costs rose by 1% for the quarter to about $1.09 billion, beating analyst expectations.

Although The New York Times referred to Yahoo’s profit for Q1 as a "footnote to Alibaba’s huge gains," which could be construed as bad news for Yahoo, Brian Schaffer, head of transaction services at Prosek Partners, said the strength of Alibaba’s performance was really the "icing on the cake" for Yahoo this quarter.

"[Yahoo’s] own results beat expectations and they continue to execute on their operational transformation," he said. "It is also an indicator that senior management changes are now starting to demonstrate tangible results, granted with much work ahead."  

Further, for US investors, this is a tremendous opportunity to invest in a Chinese growth company at a discount, and without the trepidation than can be associated with a direct foreign investment, Schaffer added.

On Singles’ Day, China’s equivalent to Valentine’s Day, which occurs in November, Alibaba broke its one-day sales record by more than 80%, selling approximately $5.75 billion worth of merchandise. Major shopping days like this aided Alibaba’s growth.

Alibaba confirmed last month that it will file for an IPO in the US with the goal of expanding globally. Analysts said it could fetch a valuation of well more than $130 billion. The company plans to file paperwork as early as next week for the IPO, which has been billed as potentially the largest since Facebook went public in May 2012.

As part of its efforts to become a "more global company," Alibaba also announced in March that it would spend $215 million for a stake in mobile messaging app Tango.

Alibaba has worked with Sard Verbinnen & Co. in the US, according to a company representative, although it was immediately unclear whether the firm is handling financial communications for the IPO.

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