Alibaba Profit Declines on Drop in Exporter Subscription Sales

Alibaba.com Ltd. (1688), the unit of China’s biggest e-commerce company that’s under a buyout offer, reported its smallest quarterly profit in two years after selling fewer website subscriptions to exporters.

Net income declined to 339.2 million yuan ($54 million), or 0.07 yuan a share, from 452.5 million yuan, or 0.09 yuan, a year earlier, Alibaba.com said in a statement yesterday. Profit missed the 468 million yuan median of four analysts’ estimates in a Bloomberg survey, and was the lowest since the first quarter of 2010. Revenue rose 3.7 percent to 1.59 billion yuan.

Parent Alibaba Group Holding Ltd., controlled by billionaire Jack Ma, said in February it may offer as much as HK$19.6 billion ($2.5 billion) to buy out minority shareholders at Alibaba.com. The unit’s export-promotion business weakened after February 2011, when it said it would tighten vendors screening on its website after some buyers were defrauded.

“The company has been undergoing a business transformation,” Richard Ji, an analyst at Morgan Stanley, wrote in an April 20 report. “Alibaba.com has been under pressure due to its exposure to China’s export business.”

Alibaba.com was unchanged at HK$13.30 in Hong Kong trading yesterday. In February, Alibaba Group said it will buy the Alibaba.com shares it doesn’t own at HK$13.50 each.

Photographer: Nelson Ching/Bloomberg

Employees work at Alibaba.com Ltd.'s headquarters in Hangzhou, Zhejiang Province, China. Close

Employees work at Alibaba.com Ltd.'s headquarters in Hangzhou, Zhejiang Province, China.

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Photographer: Nelson Ching/Bloomberg

Employees work at Alibaba.com Ltd.'s headquarters in Hangzhou, Zhejiang Province, China.

Subscribers for Alibaba.com’s Gold Supplier program for Chinese exporters fell more than 11,000 last quarter to 87,544 the company said. In 2011, Alibaba lost more than 22,000 Gold Supplier members.

Membership Revenue

The company posted a drop in membership revenue last quarter compared with a year earlier, while spending on product development and upgrades increased operating expenses 8.2 percent, Alibaba.com said yesterday.

The plan for a “complete transformation” of the business is expected to “adversely affect our revenue growth” in the future, the company said in its earnings statement.

Alibaba.com is the unit of Hangzhou, China-based Alibaba Group that is focused on business owners. The closely held parent, 40 percent-owned by Yahoo! Inc. (YHOO), also operates online commerce businesses such as Taobao and Juhuasuan that are aimed at consumers.

The proposed buyout of Alibaba.com will let the unit reorganize for the long term, free from the “pressure of market expectations,” Alibaba Group said in February.

Minority Alibaba.com shareholders should approve the buyout, said Somerley Ltd., a financial firm hired by the Chinese company to advise independent directors. The recommendation was included in a circular Alibaba filed to the Hong Kong exchange yesterday.

The company will hold a shareholders meeting on May 25 to vote on the buyout, according to the circular.

Ma sold 12 million shares in parent Alibaba Group at $13.50 each in two transactions between October and December, according to the circular. He now owns 185.97 million Alibaba Group shares,a 7.41 percent stake, it said.

To contact the reporter on this story: Mark Lee in Hong Kong at wlee37@bloomberg.net

To contact the editor responsible for this story: Michael Tighe at mtighe4@bloomberg.net

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