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Yahoo’s China Partner Messes Up Yahoo’s Pretty Valuation

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Yahoo’s China Partner Messes Up Yahoo’s Pretty Valuation

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Yahoo’s not the only company scrambling to avoid getting sucked up by Microsoft.

Yahoo owns 39% of the Alibaba Group, which in turn owns China’s biggest B2B portal, and that interest would pass to Microsoft if Microsoft buys Yahoo. So now Alibaba, reportedly spooked by the specter of Microsoft’s hands-on management and apparently convinced Microsoft will win the day, is in advanced talks with potential investors to buy back those shares, according to Reuters and the Wall Street Journal, both citing unnamed sources.

Ironically, Yahoo’s interest in Alibaba is part of Yahoo’ss justification for thinking it’s worth more than the $31 a share Microsoft offered. It's supposed to represent $2 of a Yahoo share, according to Yahoo, and Alibaba’s machinations could give Microsoft reason to lower its bid.

Alibaba apparently thinks it has dibs on buying Yahoo’s stake if control changes according to the 2005 agreement under which Yahoo China was merged into Alibaba.

Alibaba.com, which IPO’d late last year, reported a net 2007 profit of $136.3 million Tuesday. It was a euphoric IPO but the stock is now trading around its IPO price.


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