Alibaba’s profit falls 28% as app spending soars

NEW YORK — China’s biggest e-commerce operator Alibaba Group Holding yesterday reported third-quarter profit that fell far short of analysts’ forecasts after it spent more on developing apps in the fiercely competitive online market.

Net income plunged 28 per cent to 6 billion yuan (S$1.3 billion) in the three months ended Dec 31 from the corresponding period last year, the Hangzhou-based company said, well below the 8.8 billion yuan average of 19 analyst estimates compiled by Bloomberg. Revenue rose 40 per cent to 26.2 billion yuan, compared with the 27.6 billion yuan forecast.

Alibaba is investing in shopping apps and promoting its platforms to reach a target of working with more than 10 million small businesses outside China, as it expands beyond the domestic market in which it is dominant.

After raising US$25 billion in New York in the world’s largest-ever initial public offering (IPO) last September and chalking up a record 57.1 billion yuan in transactions in the Nov 11 Singles Day promotion in China, Alibaba now faces a decelerating Chinese economy and scathing criticism from the government for lax oversight of its websites.

China’s State Administration for Industry & Commerce (SAIC) on Wednesday accused Alibaba of allowing merchants to operate without required business licences, to run unauthorised stores that co-opt famous brands and to sell fake wine and handbags.

Alibaba responded by saying its Taobao Marketplace is improving its technology and procedures to counter fakes. It has decided to file a complaint against the SAIC official who oversaw a meeting with Alibaba representatives in July to discuss the claims.

Alibaba had said in its IPO prospectus there were allegations in the past, and likely would be in the future, that the company’s platforms were selling goods that were counterfeit or infringed on other copyrights, including music.

“The development of this incident would spook investors. The government is not backing down by the defiant rebuttal,” said Mr Li Muzhi, a Hong Kong-based analyst at Arete Research Service.

Alibaba shares fell about 8 per cent to US$90.60 each in pre-market trading in New York yesterday. The shares have gained more than a third since the company sold stock at US$68 apiece in its September IPO. AGENCIES