YHOO vs. Alibaba
Research for Online Investors

by John Dalt

5/27/11

Have you heard about the Yahoo vs. Alibaba controversy?  A short history…Yahoo hired a new CEO (Carol Bartz) in January 2009.  This was after the failed takeover by Microsoft.  The idea was to bring in a seasoned professional to help right the ship at Yahoo (YHOO).  Ms. Bartz had retired as CEO of Autodesk in 2006 but remained as Executive Chair of the Board.  She replaced co-founder Jerry Yang as CEO at YHOO.

YHOO owns 43% of the Alibaba Group and Jerry Yang continued to serve on Alibaba’s Board of Directors.  Alibaba is characterized as the Google of China.  Alibaba owned an online payment system called Alipay (think PayPal).  Last year Alibaba transferred 100% ownership of Alipay to a company owned by Alibaba’s CEO Jack Ma.

YHOO disclosed the transfer to the SEC earlier this month, on May 10.  This was required as a material event.  The stock dropped 7% on the news.  YHOO initially said they were not aware of the transfer.   Alibaba maintains the transfer was discussed at their Board of Director’s meetings.  The reason given for the transfer was to gain a regulatory license as a domestic company.

Stifel Nicolaus analyst, Jordan Rohan, said the license in question would be with the People’s Bank of China.  The bank might require 100% Chinese ownership for an online payment company.

YHOO bought a 39% stake in Alibaba in 2005 for one billion dollars and handed over the company’s fledgling mainland operation to Alibaba.  In 2007, Alibaba sold shares in an IPO on the Hong Kong stock exchange for $1.7 billion dollars.  Softbank of Japan owns 33% of Alibaba.  Alibaba offered YHOO $11 billion for its stake in the company in September 2010.  YHOO declined.

Alibaba is run by a four person board of directors, Jack Ma, Jerry Yang of YHOO, Masayoshi Son the CEO of Softbank and one other board member appointed by Jack Ma.  YHOO has the right to appoint an additional board member, but has not done so.

They will now.

Pending Home sales numbers fell out of the bus this morning.  The market expected a one-percent decline.  Pending contracts dropped 11.6% month-over-month.  Existing home sales last year were at their lowest level in 13 years.  This year is expected to be worse.  Pierre Ellis, a senior economist at Decision Economics, said there “appears to have been a sudden arrest in willingness to commit to a home purchase.”

The Pending Home sales numbers are compiled and reported by the National Association of Realtors.  They noted increased contract cancellations in recent months.  Buyers have cancelled purchases after appraisals came in less than the initial bids.  The realtor’s group notes it is hard to get an appraisal that buyers, sellers and lenders will all agree on.

A little history is always good to know.  Decoration Day (Memorial Day) was first proclaimed in May 1868 by The Commander in Chief of the Grand Army of the Republic, General John A. Logan.  The Grand Army of the Republic was the Union Civil War Veterans organization. Decoration Day was to be observed on May 30.  May 30 was chosen, because it was not the anniversary of a Civil War battle.

Southern states did not embrace Memorial Day until after World War I, as it was to honor Northern soldiers who defended the Republic during the rebellion (Civil War).  General Logan issued General Orders #11 on May 5, 1868 to “for the purpose of strewing flowers or otherwise decorating the graves of comrades who died in defense of their country…”

If you fly a flag at your home, it should be at half-staff until noon, then raised to full-staff for the remainder of the day.

All the Americans have ever asked is a plot of ground to bury their dead.  Pictured is Ardennes, Belgium American Cemetery where 5,329 heroes lay.  Many from the Battle of the Bulge in 1944.

Remember your neighbors (and those you didn't know) that gave their all for your freedom.

Quote:
If other eyes grow dull, other hands slack, and other hearts cold in the solemn trust, ours shall keep it well as long as the light and warmth of life remain to us.---General John A. Logan

The information presented in this newsletter is based on generally available news releases, corporate filings, current events, interviews and the editor’s opinions.  It may contain errors and you should not make investment decisions based solely on what you believe you have read here.  Do your own research, it is your money.  If you lose it, it is your responsibility, not ours or your grandmothers!  The editor may or may not have a position in any securities discussed.  The editor may have held a position in a security earlier, or in the future.

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