11 Nov 2009 08:43

Alibaba's long term future looks bright - analysts

Shanghai. November 11. INTERFAX-CHINA - Alibaba.com Ltd. reported a 27 percent increase in its total registered users in the third quarter of 2009, despite a sharp 20.4 percent drop in net profit due to heightened operation costs, according to the company's third quarter financial results released on Nov. 10.

China's leading business-to-business (B2B) e-commerce platform claimed 45.2 million registered users as of Sept. 30, including 578,901 paying subscribers worldwide. Alibaba reported a 45.3 percent increase in paying users year on year, with the number of paid subscribers in China skyrocketing by 175.2 percent year on year to total 84,868 by the end of September.

The surge in registered users - both paying and non-paying - has been attributed to an Alibaba program to encourage the international expansion of Chinese small and medium enterprises (SME)s. Under the program, the e-commerce giant invested RMB 15 billion ($2.2 billion) towards assisting such SMEs in expanding their international sales channels by developing their own online retail platforms.

Concurrent Investments in revamping marketing and IT infrastructure, as well as several recent acquisitions have increased Alibaba's operation costs in the third quarter, straining net profit, which amounted to RMB 236 million ($34.54 million) during the quarter, according to the figures.

Operation costs totaled RMB 138 million ($20.2 million) in the third quarter, up 35.15 percent year-on-year, while total revenue stood at RMB 1.03 billion ($150.77 million), up 32.1 percent year-on-year.

Elinor Leung, chief financial analyst with CLSA Asia-Pacific Markets, told Interfax on Nov. 11 that although Alibaba may face short-term roadblocks in profitability due to increased investments, building the brand globally translates into a promising future.

"We predict Alibaba's revenue growth and net profit will rebound next year, bolstered by continued growth of its user base," Leung said.

Sun Chonghui, an iResearch analyst, said in a recent iResearch report that more SMEs have turned to e-commerce to sell their goods, as uncertain economic conditions have forced companies to cut costs.

"The economic situation will actually increase Alibaba's market share in this context, as the company has increased efforts in developing SME clients while simultaneously building its reputation in the B2B market," Sun said.

China's B2B e-commerce market has grown quickly in the third quarter of 2009, with revenues reaching RMB 1.71 billion ($250.3 million), up 23.9 percent year-on-year, according to recent figures released by iResearch.

Liu Dan, a senior analyst with CCID Consulting, told Interfax on Nov. 11 that China's e-commerce market will continue to experience robust growth in 2009, as an increasing number of enterprises are recognizing the importance of e-commerce.

"We expect annual growth to be at between 35 and 40 percent for the entire year," Liu said.