Alibaba Group Holding posted profit beat analysts' estimates in its first earnings report as a public company, with increased shopping traffic and mobile spending in China generating more advertising.
Adjusted earnings a share for the September quarter were 2.79 yuan (46 US cents), Hangzhou, China-based Alibaba said on Tuesday, topping the 2.74 yuan average of estimates compiled by Bloomberg. The revenue jumped 54 per cent, more than anticipated.
Alibaba, with 307 million active buyers as of September, is luring more sellers to its e-commerce sites by providing advertising tools that analyse user preferences. Chairman Jack Ma last month said Alibaba may cooperate with Apple Inc for mobile payment services as he seeks partners in Hollywood to add television and movie content. About 29 per cent of revenue across China retail marketplaces comes from mobile, Alibaba said on Tuesday.
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"The mobile contribution to total transactions was higher than expected, a surprise," said You Na, an analyst at ICBC International Research Ltd in Hong Kong. "The revenue was also better than what people were expecting." Alibaba, which raised a record $25 billion in its September initial public offering (IPO), has jumped 50 per cent since it sold the stock at $68 apiece. The American depositary receipts rose 1.2 per cent to $103.66 at 9:46 am New York time. While the revenue surged, the profitability was hurt by costs to integrate newly acquired businesses, investments in mobile systems and marketing. The margin for adjusted earnings before interest, taxes, depreciation and amortisation dropped to 50.5 per cent from 59.4 per cent a year earlier.
Mobile devices
The company, owner of Taobao Marketplace and Tmall.com, is ramping up preparations for a November 11 sales event, its busiest shopping day of the year. It's competing with Tencent Holdings Ltd for the 527 million Chinese who access the internet from mobile devices. The net income fell 39 per cent to 3.03 billion yuan in the three months ended September, dragged down by a "significant" increase in share-based compensation expense and amortisation of intangible assets, Alibaba said. The revenue advanced to 16.8 billion yuan, compared with the 16 billion-yuan average of 26 estimates.
Softbank quarterly profit up despite Sprint woes
Softbank's quarterly profit tripled as gains from the IPO of Chinese e-commerce company Alibaba offset losses at US mobile carrier Sprint, the Associated Press reported.
The Japanese telecommunications and Internet-services company reported on Tuesday a second quarter profit of 483.1 billion yen ($4.3 billion), up from 165.8 billion yen a year earlier.
Quarterly sales surged 23 per cent to 2.11 trillion yen (USD 18.7 billion).
Softbank, the first to sell the iPhone in Japan, has widespread global investments including Chinese e-commerce company Alibaba, which listed in New York earlier this year after a record-busting stock sale.
Softbank said it gained 599 billion yen (USD 5 billion) from the listing.
One sore spot is Sprint, which Softbank bought a majority stake in earlier this year. It said costs from layoffs at Sprint will total 17 billion yen (USD 150 million).
Sprint is eliminating 2,000 jobs, or about 5 per cent of its staff, to cut USD 1.5 billion in annual spending.
Overland Park, Kansas-based Sprint, which announced a separate round of job cuts in early October, reported a USD 765 million loss for the quarter. But Softbank is eyeing Sprint as a long-term investment.
"We are heading toward a turnaround," said Softbank founder and chief executive Masayoshi Son, noting that Sprint's new chief executive, Marcelo Claure, tapped from cellphone distributor and Softbank unit Brightstar, was achieving results.
Son noted that Alibaba has become one of the world's top 10 companies, with solid growth profits, rising from its humble beginnings when he invested in it about 14 years ago.
He compared his approach to valuing, instead of killing, the goose that lays golden eggs, depicted in Aesop Fables, but warning that patience was needed.
"I've long said that whoever rules China will rule the world," he said. China has overtaken Japan as the world's second biggest economy and will in the future grow bigger than the American economy, Son said.
But he said the place to watch next is India, where the population is young, English-speaking and boasts excellent software engineers, praising Snapdeal as India's equivalent of Alibaba.
The Tokyo-based company, which also owns the Softbank Hawks baseball team, recently invested in two Indian technology companies, Snapdeal, the nation's largest digital marketplace, and Ola Cabs, which runs the technology to connect consumers with cab drivers in India.
Another company in which Softbank is a stakeholder, Yahoo Japan, has switched its electronic commerce style to more like Alibaba's, a move that has proved a success, he said.
Ma visited Hollywood in October to learn about movie studios, saying China's film industry needed great cultural products. Alibaba offers entertainment content including high- definition movies and TV shows through its set-top boxes and online video site Youku Tudou Inc., in which Alibaba has a minority stake.
China will be the world's largest movie market as the nation's middle class expands to 200 million people, Ma said.
New markets
Ma is expanding into new businesses and targeting markets outside his home country.
AliExpress, the company's market for customers outside China, was founded in April 2010 and is already the top shopping site in Russia and Brazil, markets where it currently has no employees. The company is looking for deals that can help it expand in Africa, Southeast Asia, Europe and the U.S.
Zhejiang Ant Small & Micro Financial Services Group Co., the payment-processing affiliate that includes Alipay, is expanding in the U.S. and Russia.
Alipay has 17.9 million active users overseas in more than 100 countries and is accepted by 2,000 merchants, Sabrina Peng, vice president for Alibaba's finance arm's international business, said in October.
In September, the finance business won approval to jointly set up a bank in China as it expands financial services operations.
