Tech Biz: Yahoo and Alibaba reach deal over Alipay

 

Alibaba CEO Jack Ma

NEW YORK -- Yahoo has finally come to an agreement with Chinese Internet giant Alibaba in a months-long battle over the ownership of payment site Alipay.

Yahoo (YHOO, Fortune 500) owns about 40% of Alibaba, which itself owns Yahoo China -- as well as three massive Chinese properties including Alipay. That stake is one of Yahoo's bright spots, so investors weren't pleased when uncertainty developed over Alipay.

Back in May, Yahoo disclosed to the SEC that Alibaba had transferred 100% of its ownership of its e-commerce site, Alipay, to a new company controlled by Alibaba CEO Jack Ma.

Yahoo scrambled to clean up the mess with a statement saying it was not made aware of the asset transfer until March 31 -- and that it "occurred without the knowledge or approval of the Alibaba Group board of directors or shareholders."

Alibaba disputed those claims, saying the transfer was discussed at several board meetings as long as three years ago.

Yahoo shares plunged over that week as the news continued to develop. Investors wondered why Yahoo was so out of the loop, and they questioned whether the company could retain its relationship with Alibaba.

A few weeks later, at Yahoo's analyst day, executives declined to answer most questions about Alibaba. Yahoo CEO Carol Bartz said several times that Yahoo "had an agreement with Alipay that none of us were going to discuss the past, and we're sticking to that."

Then, at Yahoo's annual shareholder day in June, stakeholders slammed the company for its handling of the Alibaba situation.

The announcement of the deal seemed to please investors early Friday, as Yahoo shares rose 6% in premarket trade. But the stock reversed course once the market opened and was down 2% in late morning trading as the broader market fell following a weak GDP report.

Terms of the deal: Under the terms of the deal, which also includes Japanese Internet firm and Alibaba investor Softbank, Alibaba will receive between $2 billion and $6 billion for an initial public offering of Alipay or any other type of Alipay liquidation.

In addition, Alibaba Group will license some technology services and intellectual property to Alipay. In return, Alipay will pay royalties to Alibaba.

The deal is expected to close by the end of 2011 and must be approved by regulators.

JPMorgan analyst Doug Anmuth said in a note to clients Friday that he is retaining his "neutral" rating on Yahoo.

"The agreement provides a definitive range of outcomes for the eventual monetization of Alipay, while also clearing an overhang on [Yahoo] stock," he wrote.

Anmuth noted that there is "very little visibility" into a timeline for an Alipay IPO, but as a major stakeholder Yahoo "can force a liquidity event after 10 years."

The Alipay battle is hardly the first time Ma, the Alibaba CEO, and Bartz have butted heads. In September, Alibaba offered to buy back Yahoo's stake for about $11 billion. Yahoo declined. To top of page

Tech Biz: List of smartphone losers gets longer

 

NEW YORK -- In the smartphone market, it's a great time to be Apple and Samsung. Nokia and Motorola? Not so much.

Last quarter, Apple (AAPL, Fortune 500) became the world's largest smartphone manufacturer for the first time, and Samsung moved up one spot to No. 2, according to a Strategy Analytics study released Friday.

They displaced Nokia, which had held the top position for more than a decade. It's a stunning achievement, particularly for Apple, which entered the market just four years ago and sells just two devices: The iPhone 4 and the iPhone 3GS.

Samsung smartphone shipments grew 520% over the past year, Strategy Analytics said. That growth was especially strong due to its Galaxy S II line of smartphones, which have proven popular abroad but haven't yet made it to the United States. The devices are expected to start selling here this quarter, and strong U.S. sales might help it overtake the top position.

Of course, Apple is also expected to unveil its next version of the iPhone in September, so Steve Jobs & Co. will likely remain a moving target.

For smartphone makers not named Apple and Samsung, last quarter was a very different story.

Nokia (NOK) retained its position of the top overall cell phone manufacturer, even though sales fell more than 20% over last year, according to an IDC survey released late Thursday. But Samsung is closing in fast. That could spell trouble for Nokia, because Samsung is performing well in traditional Nokia strongholds in which the Finnish phone giant is currently struggling: Europe and China.

The fact that smartphone sales are slumping for Nokia isn't a surprise: The company is transitioning away from developing and selling its own, underperforming mobile operating system called Symbian in favor of Microsoft's (MSFT, Fortune 500) Windows Phone 7 OS.

But Windows Phone sales have so far been underwhelming, and it remains to be seen whether the Nokia-Microsoft marriage will be mutually beneficial. It's a huge risk for Nokia to take, considering smartphones have become the biggest growth engine for the overall cell phone market over the past several quarters.

"The shrinking feature phone market is having the greatest impact on some of the world's largest suppliers of mobile phones," said Kevin Restivo, senior research analyst at IDC. "Stalwarts such as Nokia are losing share in the feature phone category."

Still, Nokia should be glad that it's not Motorola Mobility (MMI) or Research In Motion (RIMM).

Motorola announced Thursday afternoon that it lost $56 million last quarter and disappointed Wall Street analysts by saying results for its current quarter would be weaker than expected.

The company said its tepid outlook was due to delays in rolling out its new 4G smartphones and lower-than-expected profitability in its tablet business.

Motorola sold just 440,000 Xoom tablets in the quarter. The Xoom, which was the first of Google's (GOOG, Fortune 500) Android Honeycomb tablets, was expected by many analysts to be the first true test for the iPad. It hasn't been: Apple sold 9.25 million iPads last quarter.

Meanwhile BlackBerry maker RIM laid off 10% of its workforce last week in order to cut costs and focus its strategy.

RIM was once the leader of the smartphone market in North America, but sales have been waning recently as many other device makers have introduced devices with broader appeal. To top of page

Tech Biz: Twitter lands major new funding round

Twitter

Twitter has landed a major influx of cash to help it expand: The five-year-old social media company said Monday that it has just wrapped up a "significant" funding round led by venture firm DST Global.

Twitter didn't disclose how much it raised. However, Twitter amended its certificate of incorporation forms late last week to authorize the issuance of up to 25 million new shares, priced at just over $16 per share. That would let the company raise around $400 million in new funding, according to venture capital data provider VC Experts, which obtained a copy of the amended incorporation forms.

But the actual amount Twitter raised from investors could be higher, if it follows the latest tech trend of letting existing shareholders -- such as employees and early investors -- sell some of their shares to investors during a company financing round. Facebook, Groupon and Zynga -- which are also backed by DST Global -- all went that route in their later investment rounds.

"Twitter is one of the few companies that has truly changed the world," DST Global founder Yuri Milner told AllThingsD, which reported that the new round values Twitter at $8 billion. "Twitter's astonishing growth is a testament to how important it is becoming to more people every day, and why we couldn't pass up the chance to be a bigger part of its future."

Twitter, based in San Francisco, said it will use the additional funding to hire more employees, grow internationally and "aggressively innovate."

Founded in 2006, Twitter has expanded rapidly in the past year, increasing its staff from 250 to more than 500 employees. On Monday the company opened its second office, launching a New York City outpost.

Prior to its latest funding round, Twitter had already raised more than $350 million from investors -- but the company is widely believed to be unprofitable. Its most recent financing round was in December, when it raised an estimated $200 million from a group led by Kleiner Perkins.

Since then, the fast-growing company has made a number of management changes. Co-founders Ev Williams and Biz Stone stepped away from the daily operations of Twitter to focus on a new venture, while previously exiled co-founder Jack Dorsey returned to lead Twitter's product strategy. Twitter also acquired a string of companies developing around its platform as part of its expansion effort. To top of page