Alibaba Buys Stake in Indonesian Online Retailer, Extends Global Reach

By Liza Lin 

Alibaba Group Holding Ltd. plans to take part in a $1.1 billion investment in an Indonesian e-commerce firm as it seeks to expand its footprint globally.

The Chinese online retail giant will take a minority stake in PT Tokopedia, an internet marketplace that connects small businesses with consumers, the Jakarta-based company said Thursday.

Tokopedia said Alibaba will be joining existing investors.

Southeast Asia, a region of more than 600 million consumers, is attracting investment from Chinese and U.S. technology firms as incomes and smartphone penetration grows.

The investment comes barely a month after Amazon.com Inc. announced its entry into the region through Singapore, and follows Alibaba's $1 billion investment to raise its stake in Southeast Asian online retailer Lazada.

Coming up with the capital won't be a problem. Alibaba on Thursday reported net income of $2.17 billion, for its fiscal first quarter ended June 30, up 94% from the year before. Quarterly revenue rose 56% from the prior-year period to $7.4 billion, beating estimates of analysts surveyed by S&P Global Market Intelligence. Adjusted earnings were $1.17 per share, up 65% from the year before.

Alibaba shares were up about 4% in early New York trading. They have gained more than 80% this year,

Alibaba operates China's two most popular online-retail websites, Tmall and Taobao. It said sales from its core commerce division rose 58% to $6.3 billion driven by growth in online sales.

The company will step up its investment in the second half of the year to expand its market share in the business-to-consumer market, Chief Financial Officer Maggie Wu said.

Revenue at its digital-media and entertainment division rose about a third to $602 million. Still, the unit, which includes mobile browser UCWeb, Alibaba Pictures and video-streaming site Youku Tudou, faces stiff competition in China's online-video space, with many players competing for licensed content.

Alibaba Cloud, its cloud-computing arm, posted revenue of $359 million. It signed an agreement earlier this month with the Macau city government to use its cloud technologies to help with city management.

Alibaba's results, however, were dampened by a warning from the Zhejiang branch of the Cyberspace Administration of China, the country's internet regulator. The regulator ordered five websites, including Taobao, to remove vendors that sell illegal virtual private networks, or VPNs, that allow internet users to circumvent China's firewall.

"Taobao forbids the listing or sale of any products that are forbidden by applicable law," an Alibaba spokesperson said. "We will continue to strive to ensure that third-party sellers comply with applicable law and marketplace rules."

Alibaba, founded by Chinese billionaire Jack Ma, also reiterated its strategy to expand beyond traditional e-commerce to provide services such as logistics, payments, and cloud to online merchants and physical store retailers.

It has created its own brick and mortar supermarket store unit called Hema, and shoppers staying within a certain radius of its supermarkets can order online and have their groceries delivered in 30 minutes.

Write to Liza Lin at [e-mail]

(END) Dow Jones Newswires

August 17, 2017 10:47 ET (14:47 GMT)

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