September 16, 2010 / 4:14 AM / 7 years ago

Exclusive: Yahoo shows no interest in Alibaba stake sale

NEW YORK (Reuters) - Yahoo Inc was in talks recently to sell back part of its stake in Alibaba Group, the Chinese group said, but the talks were unsuccessful.

Yahoo Chief Executive Carol Bartz told Reuters in a wide-ranging interview on Wednesday that Alibaba Group “constantly” approaches Yahoo about repurchasing its stake but Yahoo has no intentions to sell.

Yahoo shares rose more than 4 percent on a report that a deal is pending for Yahoo to sell its roughly 39 percent stake in Alibaba, the parent company of Chinese Web sites including Alibaba.com and Taobao, for up to $11 billion.

Responding to the report, Alibaba Group said on Thursday there were talks recently but they ended after an agreement could not be reached.

“We made an offer that included a partial sale and a specific plan to maximize the value of their remaining stake,” said Alibaba Group spokesman John Spelich.

“That offer was rejected, and they countered with a very different proposal, which we found unjustifiable, and we terminated the discussions,” he said.

Yahoo’s Asian assets, which also include a 35 percent stake in Yahoo Japan, account for about 40 percent of its value by some estimates.

Alibaba Group is China’s top e-commerce firm. Alibaba Group owns unlisted Taobao, China’s largest consumer-oriented e-commerce site, Alipay, China’s dominant e-payment service and Alibaba.com, the country’s largest business to business online platform.

Analysts see Yahoo not intending to sell until Alibaba’s high-growth units, namely Taobao and Alipay, go public.

“People are wringing their hands about what to do in the China market...this is a great way to get upside in the China market,” Bartz said, of the world’s largest Internet market by users that has challenged rivals such as Google Inc.

Despite Bartz knocking down the speculation, the shares continued to rise on Bartz’s disclosure of Alibaba’s persistent overtures, said BGC Partners analyst Colin Gillis.

“It’s highlighting the fact that Alibaba would like to reclaim the stake,” he said. “That’s a positive, you’ve got a buyer.”

Bartz played down recent reports suggesting tension between Yahoo and Alibaba, noting she recently sat next to Alibaba CEO and founder Jack Ma all day during a Microsoft summit.

“I‘m betting Jack Ma will do a great job in the company,” Bartz said.

However, Alibaba has made those tensions very clear, chiding Yahoo through different media outlets. Alibaba.com’s chief executive told Bloomberg last Friday that Yahoo presented no value to the firm without its own search technology. Alibaba also told Reuters last week the firm was re-evaluating its relationship with Yahoo.

SEARCH REVENUE TO IMPROVE

The 62-year-old Bartz, who plays the accordion and the piano, took over the top job at Yahoo in January 2009 from co-founder Jerry Yang, whose tenure was marked by Yahoo’s rejection of a $47.5 billion acquisition offer from Microsoft.

A former chief executive of software maker Autodesk Inc, Bartz has moved to cut costs and sell underperforming businesses since she joined.

In July 2009, Bartz signed a 10-year search partnership with Microsoft. The deal shifts Yahoo’s costly back-end Web indexing chores to Microsoft while combining Yahoo and Microsoft’s Web audience to create a stronger rival to Google.

Bartz said the transition of the company’s Internet search advertising system to Microsoft Corp’s technology would occur by the end of October, and that Yahoo would unlikely delay the move until after the holiday season.

Search ad rates would pick up in mid-2011, following the shift to Microsoft’s technology, she said.

“After the transition, I think we’ll see a dip for a while just because it will be inefficient for a while, but by mid-next year I think we’ll see the RPS (revenue per search) come up on the site,” Bartz said.

While advertisers remained “careful,” Bartz said Yahoo was seeing strong demand for video ads. Yahoo’s ad space for videos is “always sold out,” she said.

Mobile advertising, although still a nascent market, has become the next battleground pitting Yahoo against Google and Apple.

Earlier this year, Apple introduced its iAd service to create premium ads for marketers on the iPhone.

“That’s going to fall apart for them,” Bartz said about Apple’s iAd service. “Advertisers are not going to have that type of control over them. Apple wants total control over those ads.”

Investors credit Bartz with bringing a decisive management style and much-needed discipline to a company known for a culture of feuding fiefdoms and a lack of urgency.

While Yahoo’s operating margins have risen, revenue has continued to stagnate.

The 13 per cent rise in Yahoo shares over Bartz’s tenure has lagged the Dow Jones Industrial Average’s 24 percent rise and the Nasdaq Composite’s 49 percent rise.

Reviving Yahoo’s fortunes will not happen overnight, Bartz said: “There’s no miracle coming here. We’re just running a good company and are going to run an even better company.”

Yahoo shares rose 4.7 percent to $14.27 on the Nasdaq stock market. (Additional reporting by Melanie Lee in SHANGHAI; Editing by Robert MacMillan and Anshuman Daga)

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