Alibaba Options for Mobile Growth Include Acquisitions, Ma Says

Billionaire Jack Ma, founder of Alibaba Group Holding Ltd., said China’s largest e-commerce company may use acquisitions to boost its growth through apps for smartphones and tablets.

Alibaba started developing its mobile business three years ago and hasn’t kept up with competitor Tencent Holdings Ltd. (700) and its WeChat messaging service, Ma said at the Credit Suisse Asian Investment Conference in Hong Kong today. Tencent earlier posted net income that rose 37 percent in the fourth quarter and said WeChat had more than 300 million users by January.

“We also invested heavily, but we are not that lucky and not creative, so creative like Tencent, which has WeChat, such a powerful thing,” Ma said. Alibaba’s options to compete include “mergers and acquisitions, hiring more people,” he said.

Ma is focusing on strategy as chairman of Alibaba after naming Jonathan Lu to replace him in May as chief executive officer. The billionaire said in June the company could sell shares in an initial public offering within five years, and the 2012 buyback of a stake held by Yahoo! Inc. (YHOO) valued the e- commerce business at about $35 billion.

The Hangzhou, China-based company’s units include Taobao, a cross between Amazon.com Inc. and EBay Inc. (EBAY), with more than 500 million registered users. It’s one of the 20 most-visited websites in the world, according to the company.

Alibaba’s Tmall, a business-to-consumer portal, sold $3.1 billion worth of goods in one day during a Nov. 11 promotion, and Microsoft Corp. said yesterday it would open an outlet on the site. Ma said his company accounted for 5 percent of China’s retail market last year.

‘Golden Age’

“What we want to do is to change China,” Ma said. “The next five years are the golden age for e-commerce.”

China has more online shoppers than the U.S., and the value of its online retail transactions is projected to double to 2.57 trillion yuan ($411 billion) by 2015 from an estimated 1.22 trillion yuan last year, according to Analysys International, a Beijing-based researcher.

China had 564 million Internet users at the end of last year, up 10 percent from the year before, according to the government-run China Internet Network Information Center. That is greater than the population of any country except India.

China is projected to have an expansion of 8.1 percent this year, up from 7.8 percent last year, according to the Bloomberg Contributor Composite.

Potential IPO

“If they list, it will be the largest IPO this year,” Eric Qiu, an analyst at Guosen Securities Co. in Hong Kong, said of Alibaba. “Their market capitalization could be larger than Tencent and Baidu combined.”

Tencent, China’s largest Internet company, is valued at about $63 billion, while Baidu Inc., owner of China’s largest search engine, has a market value of more than $29 billion.

Alibaba’s net income increased 81 percent to $484.5 million in 2012, Yahoo said in a March 1 filing. Sales jumped 74 percent to $4.08 billion.

When asked about Alibaba’s profit from e-commerce, Ma responded, “Don’t worry about us, we are making money. When we IPO, you will know the numbers.”

The 48-year-old Ma, a former English teacher who has led Alibaba since its formation in 1999, has a net worth of $3.4 billion, according to the Bloomberg Billionaires Index.

Ma and 17 others founded Alibaba as an online marketplace for Chinese companies. The business grew as economic liberalization spurred a boom in manufacturing and trade. It has expanded its workforce to more than 24,000 and added services including cloud computing, online payment and consumer auctions.

CEO Transition

Lu, who has been with Alibaba since 2000, will take over as CEO on May 10. He is the only senior executive with experience overseeing all of its major divisions after taking over the Taobao online shopping platform in 2010, building its south China sales team and starting its Alipay online payments business.

After helping establish Alipay and running Taobao, Lu has the right background to run Alibaba, said Jim Tang, an analyst at Shenyin Wanguo Securities Co. in Shanghai.

“Still, the most important person is going to remain Jack Ma,” Tang said.

To contact the reporter on this story: Lulu Yilun Chen in Hong Kong at ychen447@bloomberg.net

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

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