Alibaba shuns gloom to pursue expansion

PUBLISHED : Wednesday, 12 November, 2008, 12:00am
UPDATED : Wednesday, 12 November, 2008, 12:00am, the mainland's largest business-to-business e-commerce company, plans to pursue its expansion strategy despite the gloomy economic outlook.

It also announced yesterday a share buy-back of up to HK$2 billion.

'We will make the same investment as before [the crisis]. The economic downturn actually represents a good opportunity as rent becomes cheaper and staff more available,' said chief executive David Wei.

'We are also looking at several merger and acquisition targets in the domestic and overseas markets.'

The company, which raised US$1.5 billion by listing in Hong Kong last year, said it planned to buy back up to HK$2 billion worth of shares by the end of next year.

'We believe a buy-back programme is appropriate at this time and it demonstrates the directors' confidence in the fundamentals of our business,' said Mr Wei.

The firm had 6.14 billion yuan in cash at the end of September.

For the third quarter, its net income surged 49 per cent year on year to 308.6 million yuan as revenue rose 37 per cent to 780.2 million yuan.

Deferred revenue and customer advances, which reflect new sales made in the quarter, rose 3 per cent from last quarter to 1.99 billion yuan.

It added 1,070 new accounts to its premium membership last quarter, bringing the total to 30,836.

'We believe customer growth will be maintained at the same level in the fourth quarter,' said Mr Wei.

But the new additions were far fewer than the number of new clients it generated last year when the economy and its exports were booming.

'In the second half of last year, Alibaba had about 2,700 new Gold Supplier members every quarter. But from this year, it had between 1,000 and 1,200 a quarter,' said an analyst.

The company had introduced several measures to counter the economic downturn, including a revamp of its sales force. Recently, it launched a low-price alternative to its Gold Supplier membership and enhanced value-added services.

'For us, the worst period was the second quarter, but as our plans have taken effect, there are fewer worries,' said Mr Wei. 'Export volume from China will be lowest by the third or fourth quarter next year, but exporters' margins will start to grow by then, as the tax rebate takes effect and raw material prices drop.'