September 10, 2010 6:20 pm

Alibaba chief steps up attack on Yahoo

The dispute between Alibaba, China’s biggest e-commerce company, and Yahoo Inc over business in mainland China has escalated further, suggesting that the Chinese group’s relations with its main shareholder could be beyond repair.

David Wei, chief executive of Alibaba.com, the group’s listed flagship, said Yahoo was a business threatened with demise during an interview with the Financial Times.

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The attack follows a push by Yahoo Hong Kong into mainland China, bringing it into competition with Alibaba. The Hong Kong unit said it was taking advertising from businesses on the mainland, who are natural clients of Alibaba and Yahoo China, which Alibaba has owned since 2005.

Yahoo Hong Kong is owned by Yahoo Inc, which sold off Yahoo China in 2005 in return for a 40 per cent stake in Alibaba Group, the unlisted parent of Alibaba.

Mr Wei said his company’s relationship with Yahoo Inc was like that of an estranged grandson and grandfather. Asked whether Alibaba would take steps against the US web portal over Yahoo Hong Kong’s move, he said: “Chances are the grandfather will pass away anyway.”

Mr Wei also called on Yahoo to respect the 2005 deal in which Alibaba acquired Yahoo China. He declined, however, to elaborate on which part of the agreement he believed the US group had violated.

Yahoo declined to comment except to note that it had one of the strongest web properties in Hong Kong and was committed to bringing in new revenue.

Relations between the two groups have long been tense. Yahoo has been unhappy that its China unit’s share of the world’s most populous internet market has dwindled under Alibaba’s management.

Last year, Yahoo sold the small direct stake it also held in Alibaba.com. And this year the two publicly disagreed over Google’s stand-off with Beijing over censorship. Yahoo was generally supportive of Google’s unwillingness to censor search results, which drew sharp disagreement from Alibaba.

Mr Wei indicated that Alibaba had deeper misgivings about its ties with Yahoo.

He suggested that Alibaba’s main rationale for the 2005 deal was to gain control of Yahoo’s own search technology. Yahoo had failed to live up to its part of the deal, he said, because that technology no longer existed after Yahoo and Microsoft reached a search agreement last year.

Alibaba said this year it would like to buy back Yahoo’s remaining stake in the group, but Mr Wei’s anger reflects the fact that the Chinese company cannot force Yahoo to sell. Yahoo has said it is happy to hang on to the stake.

In contrast with Alibaba’s troubles with Yahoo, the Chinese group received assurances on Friday from eBay, a potential competitor, that the US e-commerce company was keen on co-operation. John Donahoe, chief executive, appeared at Alibaba’s annual industry event in China and said the two companies would work together, with eBay serving retail customers and Alibaba offering wholesale services for businesses.

Additional reporting by Joseph Menn

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