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May 13, 2010
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Alibaba posts best profit in a year, eyes value-add growth

By
Reuters
Published
May 13, 2010

By Melanie Lee

SHANGHAI, May 13 (Reuters) - Alibaba.com (1688.HK), China's largest e-commerce company, reported its best results in a year on strong paid-customer growth and predicted increased use of its value-added services for the year.

Alipay

The e-commerce firm, which operates online sites connecting millions of buyers and sellers globally, is the listed unit of Alibaba Group, in which Yahoo (YHOO.O) holds a nearly 40 percent stake.

Alibaba.com reported a 36.8 percent increase in paying members for the first quarter. Analysts have said its next engine of growth will come from increasing its average revenue per user (ARPU) from its value-added services rather than the traditional subscription model.

The firm recently launched a new wholesale platform AliExpress and engaged its former rival Ebay's (EBAY.O) unit PayPal to provide e-payment services.

"It should be easier for the company to maintain the momentum going forward, steady growth, not high growth, said Steven Liu, an analyst with DBS Vickers.

"We can expect stronger customer growth by lower ARPU going forward," he said.

Alibaba.com said revenue from its international and China marketplace grew 42.2 percent and 34.9 percent respectively.

"Accelerating member acquisition in this barely penetrated market is of utmost strategic importance," said Alibaba.com in a statement of the Chinese market.

Earlier this year, it cut basic membership fees for its China marketplace, its domestic website, and bought web-hosting company HiChina for $63.8 million in an effort to attract small businesses in China to its platform.

Alibaba.com competes with Global Sources (GSOL.O) in China's 1.5 billion yuan business-to-business (B2B) marketplace industry.

Web commerce in China has surged in recent years, as buyers tap the Internet for better deals from more suppliers in the nation's highly fragmented distribution networks.

The Chinese firm said it was also on the lookout for investment opportunities in the United States and India.

"We continue to look at expansion opportunities in the U.S., including acquisition investment opportunities," said David Wei, chief executive of Alibaba.com.

Founded by the charismatic Jack Ma who birthed China's e-commerce scene, Alibaba.com stopped selling shark fin products last year, a reflection of Ma's stated distaste for the controversial food.

STRONG RESULTS

Alibaba.com said its January-March profit rose 34 percent to 330 million yuan from a restated 246.7 million yuan. That beat the average analyst forecast of 277.9 million yuan, according to Thomson Reuters I/B/E/S.

Total revenue grew 49.3 percent to 1.22 billion yuan. Deferred revenue and customer advances for the quarter, a key measurement of future performance, rose 43.6 percent.

Last month, Chief Executive David Wei told Reuters he expected revenue growth to accelerate this year, while margins were likely to begin improving in 2011 after coming under pressure due to the company's expansion.

Alibaba.com shares closed up 1.76 percent on Thursday 13 May. The stock is down 17 percent this year while the benchmark Hang Seng Index .HSI is down 7 percent. (Reporting by Melanie Lee; Editing by Valerie Lee)

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