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China's Alibaba says profit down but growth firm

Owen Fletcher | March 20, 2009
More firms are turning to e-commerce to cut costs amid economic recession, Alibaba's CEO said

BEIJING, 19 MARCH 2009 - Chinese e-commerce site Alibaba.com reported a fall in fourth-quarter net profit as the company raised sales and marketing costs to maintain growth in the economic downturn.

Alibaba's net profit fell by 57 per cent from a year earlier to less than 200 million yuan (US$29.3 million) in the last three months of 2008, the company said Thursday.

Chinese and foreign firms trade everything from lumber and heavy machinery to iPods and televisions on Alibaba's Web site.

Revenue still grew as the company launched new value-added services and a discount scheme that boosted signups for its highest membership level. Fourth-quarter revenue was 805.9 million yuan, up 27 per cent from a year earlier.

Alibaba also benefited from a rise in the number of firms looking to cut costs by doing business online amid the recession, David Wei, CEO of Alibaba, told reporters at a briefing.

"We believe tough times create new opportunities, at least for e-commerce," said Wei.

Alibaba will seek further growth as it invests $30 million in overseas marketing and hires 2,000 to 3,000 new employees this year, Wei said. The firm will upgrade its Silicon Valley office from a customer service center to include sales and product development departments, he said.

The new hires will raise the size and cost of Alibaba's staff by as much as 30 per cent, Wei said. Alibaba reported staff costs of 1 billion yuan last year.

"We say year 2009 is a year of investment," Wei said.

Executives from Alibaba Group, Alibaba.com's parent company, discussed expanding U.S. operations in meetings with potential partners including Google, eBay, and Microsoft during a two-week trip to the U.S. this month.

Many U.S. firms already trade products on Alibaba.com. Other Alibaba Group firms that could see U.S. partnerships include auction site Taobao.com and online payment system Alipay.

 

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