Alibaba’s Ma Eyes New Partner In Apple’s Cook
The headlines are buzzing today with news about newly listed Alibaba (NYSE: BABA), led by word that the e-commerce giant may explore an electronic payments tie-up with global gadget leader Apple (Nasdaq: AAPL). I’ll be quite frank and say that such a tie-up would seem destined for disaster, based on the previous experience between Alibaba and Yahoo (Nasdaq: YHOO), its only other major partner in a similar past tie-up.
Meantime, Alibaba has also announced a spin-off of its fledgling online travel business, posing the interesting possibility of some major acquisitions as it tries to quickly expand the unit and also presenting a challenge to sector leaders Ctrip (Nasdaq: CTRP) and Qunar (Nasdaq: QUNR). Lastly there’s the largely technical news bit that Alibaba’s stock broke through the $100 mark for the first time in the latest trading session, putting it nearly 50 percent above its IPO price, as investors eagerly await the company’s maiden earnings report set for next Tuesday. (earnings calendar)
We’ll begin this Alibaba wrap-up with the headline news that saw Alibaba’s colorful and talkative founder Jack Ma and Apple’s softer-spoken CEO Tim Cook attend the same event near Los Angeles. (English article; Chinese article) The pair spoke separately, but Cook confirmed his company would talk with Alibaba later in the week about a potential tie-up in the electronic payments space. That would most likely see Alibaba’s Alipay Wallet product form some kind of alliance with Apple’s own newly launched Apple Pay. Both systems allow users to pay for products in the real and virtual worlds using accounts linked to their mobile phones.
This kind of tie-up looks good in theory, as it would instantly give Alibaba and Apple access to each other’s huge home markets. But the reality could be much different due to the personalities involved. If Steve Jobs were still running Apple, I would say this particular tie-up would never happen because Jobs and Ma would clash so much that any partnership would quickly unravel.
Alibaba historians will know that Ma sold 40 percent of his company to Yahoo in 2005, in what looked like a smart and logical pairing at that time. That partnership was forged by Yahoo co-founder Jerry Yang, who was happy to remain a largely passive investor while Ma made all the important decisions at Alibaba. But all that changed when Yang later got pushed aside at his own struggling company and Ma clashed big-time with Yahoo’s new CEO Carol Bartz, who was a far more hands-on manager.
Tim Cook clearly isn’t as combative as Steve Jobs or Carol Bartz, but he also isn’t as passive as Jerry Yang and would probably have some very strong ideas about how a tie-up with Alibaba should work. If those ideas didn’t match with Ma’s own thoughts, which seems almost inevitable, a tie-up between these 2 companies could quickly unravel, providing an embarrassing media spectacle for both sides.
Meantime, let’s look quickly at the other big news bit that has Alibaba spinning its online travel unit into a stand-alone business at the Internet address of Alitravel.com (company announcement). The unit, formerly called Taobao Travel, operates a platform that lets third-party travel agents offer products like hotel bookings and air tickets directly to consumers. That’s a similar business model to Qunar’s but different from Ctrip, which offers its own products and services directly to buyers.
Ctrip and Qunar shares both rose slightly after the Alitravel announcement, indicating investors aren’t too concerned about the new challenge just yet. Alitravel does have quite a bit of catching up to do, though it could make some quick progress through an acquisition of a mid-sized player like eLong (Nasdaq: LONG), Tuniu (Nasdaq: TOUR) or Tongcheng. I wouldn’t be too worried either just yet if I was Ctrip or Qunar, but both of these companies will undoubtedly be keeping a close eye on Alitrip in the next year.
Bottom line: A potential electronic payments tie-up between Alibaba and Apple would almost certainly end in an embarrassing divorce, while Alibaba’s new travel site won’t pose any immediate threat to Ctrip or Qunar.
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