Yahoo to sell fewer shares of Alibaba

Yahoo pledged to pay its shareholders at least half the proceeds from Alibaba's mega initial public offering this autumn and plans to keep a larger stake in the mainland e-commerce company than expected.

Yahoo's roughly 24 per cent stake in the world's largest internet retailer is viewed on Wall Street as its most prized asset.

On Tuesday, it said Alibaba had agreed to reduce the number of shares Yahoo is required to sell in the listing to 140 million shares from 208 million previously.

That news helped offset the US company's disappointing results. Yahoo also forecast third-quarter net revenue, excluding fees paid to partner websites, of US$1.02 billion to US$1.06 billion, less than the US$1.1 billion Wall Street analysts had expected on average.

"What you see is the fundamentals at core Yahoo continue to deteriorate, but there's at least some good news on the Alibaba front," said Macquarie Research analyst Ben Schachter. "The idea is that Yahoo shareholders can participate and benefit from the upside to Alibaba post the IPO, as opposed to just having to sell more stock in the IPO."