China's largest online commerce company Alibaba has been in late-stage talks with investors looking to finance  buying back a multibillion-dollar 39 percent stake in the firm presently held by Web pioneer Yahoo, in an effort to increase independent management control should Microsoft succeed in its bid to acquire Yahoo, according to a Wall Street Journal report citing people close to the matter. Executives at Hangzhou, China-based Alibaba, wary of Microsoft's size as the world's biggest software maker and its past noted for a hands-on management style, are worried that should Microsoft acquire the Sunnyvale, California-based firm, Alibaba's reputation as a Chinese company and its ability to manage freely could be at risk, according to the people familiar with the situation. Firm of Former Teacher Saw Profits Quadruple in 2007 Online commerce portal Alibaba.com Ltd., founded in 1999 by former schoolteacher Jack Ma, the top holding  among a vast group of businesses owned by Alibaba Group, recorded the biggest initial public offering ever for an Internet company in China, when it raised $1.7 billion in November 2007 after being listed in Hong Kong. Alibaba.com, which operates primarily as a trading service for businesses, announced Tuesday that its revenue climbed by almost 60 percent in 2007, while profits more than quadrupled. Despite holding a board of directors seat and a nearly 40 percent stake in Alibaba, making it the largest shareholder, Yahoo does not control operations at Alibaba, a task left to Ma and other company managers. Alibaba's investor negotiations have come to light as Yahoo seeks to convince its shareholders that it is worth more than Microsoft's bid, which now values Yahoo at $41.4 billion, and that an offer of more than $45 billion is necessary before it would be willing to sell, Yahoo said Tuesday. Yahoo, six weeks into a standoff with Microsoft for control of the Web media company, has said it is on pace to make its earnings estimate for 2008 and predicted that by 2010 its revenue, after advertising commissions, will reach about $8.8 billion, more than 70 percent higher than 2007 figures. Invoking Clause To Defend Independence The Alibaba maneuvers to defend its independence revealed Wednesday add to mounting doubts among investors and analysts that Yahoo can prevent a Microsoft takeover. Should Microsoft succeed in purchasing Yahoo, Alibaba plans to pursue the execution of a "right of first offer" clause present in its agreement with Yahoo, which would allow it the opportunity to purchase Yahoo's stake in the firm, although it did not provide details of the plan Wednesday. The clause, contained in a 2005 United States Securities and Exchange Commission filing, may be open to legal interpretation, although it is expected to be executed only if Microsoft's Yahoo bid succeeds, and would give Alibaba shareholders the option to buy Yahoo's stake. Alibaba, the third largest search engine in China, struck a deal with Yahoo in 2005 that saw the California firm give it $1 billion in cash for a stake in Alibaba. Japan's Softbank Corporation is among Alibaba's primary shareholders, owning some 28 percent of company shares, while Ma owns 33 percent. Several investors and large Chinese institutions are believed to be among those who would finance the purchase of Yahoo's stake in Alibaba, according to people familiar with the matter. Reaction To Alibaba Maneuvers Members of the online discussion forums operated by WebmasterWorld, a community of webmasters and search engine marketing (SEM) professionals founded by chief executive Brett Tabke,  reacted swiftly to Alibaba's Wednesday maneuvering. "All indications have been that Alibaba is the central government's primary alter ego for international trade and trade promotion," wrote a WebmasterWorld member using the handle "Webwork." "Trade in Chinese manufactured goods is not quite Microsoft's market - though it certainly wouldn't be a bad move for Microsoft to 'open up new markets and revenue streams'," the member added. Alibaba.com Corporation entered into a partnership with Microsoft in April 2007 aimed at helping smaller Chinese firms. China's Alibaba Looks To Buy Back Yahoo Stake Should Microsoft Bid Prevail Alibaba has hired law firm Wachtell, Lipton, Rosen & Katz as advisors on the matter, and the Wall Street Journal has reported that Deutsche Bank has also been retained as an advisor. Part of Yahoo's appeal to Microsoft has been its strength in the Asia Pacific region, and Wednesday's revelations from Alibaba may disappoint Microsoft, which has looked to Yahoo's Alibaba holdings as a strategically important part it hopes to acquire should its bid succeed. Aside from an influx of money Microsoft could see if Alibaba is able to buy back Yahoo's shares, the Redmond, Washington-based firm would lose out on gains Yahoo has made in the increasingly important Asian Pacific region. Wednesday trading saw the second-biggest gain in Alibaba stock since it began trading in November 2007. Related Links:
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9:14 pm on Mar. 19, 2008 (utc 0)