Alibaba profit misses estimates

Alibaba.com Ltd, the part of China's biggest e-commerce company that may be taken private, reported a quarterly profit that fell below analysts' estimates as anti-fraud measures reduced the number of vendors that use its site for exports.

In the fourth quarter of 2011, the company's net income declined to 386 million yuan ($61 million) from 410 million yuan a year earlier, Alibaba.com said in a statement on Tuesday. That was below the 432-million-yuan average estimate compiled by Bloomberg from predictions made by five analysts.

The company's sales meanwhile increased to 1.7 billion yuan in the fourth quarter, up from 1.5 billion yuan in the same period a year ago.

After bogus sellers defrauded buyers on Alibaba's website, fewer exporters have been paying the Hangzhou-based company to set up online accounts. That has prompted Jonathan Lu, Alibaba chief executive officer, to adopt stricter screening procedures.

Alibaba Group Holding Ltd, the company's parent, plans to take Alibaba.com private, two people with knowledge of the matter said last week. Their statement came after the value of the unit's stock had decreased by more than 42 percent in Hong Kong trading last year.

"The state of the business is deteriorating," Jiong Shao, head of Internet research at Macquarie Group Ltd in Hong Kong, said in a Bloomberg Television interview before the release of the earnings. Alibaba.com will lose more customers this year, he said.

The company has been suspended from trading in Hong Kong since Feb 9, until a statement is released regarding a transaction concerning Alibaba Group. The company's stock declined by 44 percent in the 12 months before the trading halt, lagging behind shares of the company's Chinese Internet rivals Baidu Inc and Tencent Holdings Ltd.

The number of subscribers to Alibaba.com's Gold Supplier program for exporters fell by 18 percent last year to reach about 99,000, the company said. The steps taken to improve the website have hindered the recruitment of subscribers and "adversely" affected the company's performance, Alibaba.com said in Tuesday's statement.

Alibaba Group is seeking to borrow about $3 billion from six banks for a potential deal involving Yahoo Inc. The deal could also call for buying back Alibaba.com, a person familiar with the matter said on Friday.

"The company probably wants to (turn private) in order to execute a long-term strategy, instead of facing pressures from capital markets," said Alicia Hu, an analyst at Daiwa Securities Capital Markets in Hong Kong who rates Alibaba.com as "underperform".

Alibaba Group, part-owned by Yahoo, may offer almost HK$13.50 ($1.74) a share to buy out minority Alibaba.com shareholders, the people familiar with the matter said last week. Alibaba.com's shares were sold for HK$13.50 each when the company held its $1.7 billion initial public offering in 2007, then the biggest IPO for an Internet company since Google Inc's sale in 2004.

Australia & New Zealand Banking Group Ltd, Credit Suisse Group AG, DBS Bank Ltd, Deutsche Bank AG, HSBC Holdings PLC, and Mizuho Corporate Bank Ltd are arranging the loan, which will be marketed to other banks in general syndication, another person familiar with the matter said on Tuesday.