Alibaba quarterly net income falls amid mobile growth

Alibaba Group's net income continues to be hampered by costs associated with its landmark IPO in the United States last year, despite seeing a moderate rise in income from operations for the December quarter and a whopping 448 percent year-on-year surge in mobile revenue.
Written by Leon Spencer, Contributor

Chinese e-commerce leviathan Alibaba has reported a 28 percent year-on-year fall in net income to $964 million (5.98 billion yuan) in its December quarter financial results, with the company citing costs associated with its initial public offering (IPO) in the United States last September.

In its quarterly results statement, Alibaba Group said the year-on-year decrease in net income for the three-month period was due to an increase in share-based compensation expense, along with a $134 million one-time charge for financing-related fees as a result of its early repayment of $8 billion bank borrowings, and an increase in tax expenses.

Alibaba's September 2014 quarterly results were also hampered by costs relating to the company's IPO, with net income falling year on year in that quarter by 39 percent.

However, the company surged ahead in most other metrics over the quarter, reporting a 6 percent year-on-year increase in income from operations to $1.5 billion, a 40 percent lift in revenue to $4.2 billion, and a massive 448 percent boost in mobile revenue to $1.04 billion.

Additionally, the company reported a 34 percent increase compared to the same period the previous year in non-GAAP earnings before interest, tax, depreciation, and amortisation (EBITDA) to $2.43 billion.

"Alibaba performed very well this quarter, with revenue growing 40 percent year on year," said Maggie Wu, Alibaba Group chief financial officer. "We continue to execute our focused growth strategy, and the fundamental strength of our business gives us the confidence to invest in new initiatives to add new users, improve engagement and customer experience, expand our products and services, and drive long-term shareholder value."

The company also picked up more than a few new customers in the quarter, with a 95 percent year-on-year increase in mobile monthly active users, at 265 million as of December 31, a 213 percent surge in quarterly mobile gross merchandise volume, and a 45 percent increase in annual active buyers -- up to 334 million in the December quarter.

"We delivered a strong quarter with significant growth across our key operating metrics," Alibaba Group CEO Jonathan Lu told shareholders. "Gross merchandise volume across our China retail marketplace grew 49 percent year on year, and our annual active buyers increased to 334 million in 2014, an increase of 45 percent year on year.

"Our unrivalled leadership and momentum in mobile continued -- we added 48 million active users sequentially and delivered over $1 billion in mobile revenue during the quarter. Our business continues to perform well, and our results reflect the strength of our ecosystem and the strong foundation we have for sustainable growth," he said.

Not surprisingly, Alibaba Group's international retail commerce result increased substantially, with the company seeing a 110 percent boost in revenue compared to the same period the previous year to $89 million, and a 21 percent increase in international wholesale commerce revenue to $195 million.

Meanwhile, the company's China retail commerce revenue -- which makes up 82 percent of its entire revenue tally -- grew by 32 percent year on year for the quarter to $3.4 billion, and its China wholesale commerce revenue increased by 41 percent to $139 million.

While Alibaba Group may be the darling of the New York Stock Exchange after its record-breaking IPO -- despite the company's share price having fallen from $120 in November last year to less than $90 this week -- it has been copping some heat from authorities in its home country.

Last week, Chinese regulator the State Administration for Industry and Commerce (SAIC) publicly released a report accusing Alibaba's largest e-commerce platform, Taobao, of failing to stamp out the sale of fake and counterfeit items on its platform.

This is despite Alibaba's recent memorandum of understanding that it signed with Microsoft in order to strengthen its anti-counterfeit measures on the Taobao marketplace and Tmall.com.

In response to the Chinese government's accusations, Alibaba Group's executive vice chairman Joe Tsai openly questioned the accuracy of the report, saying its findings were the result of flawed methodology.

"We believe the flawed approach taken in the report, and the tactic of releasing a so-called 'whitepaper' specifically targeting us, was so unfair that we felt compelled to take the extraordinary step of preparing a formal complaint to the SAIC," said Tsai.

"The issues of counterfeiting and IP protections are a part of the problems in a growing economy today, whether it is online or offline," he said. "We have a zero tolerance policy towards counterfeits on our platform because the health and integrity of our marketplaces depend on consumer trust."

On January 29, it was reported by The Wall Street Journal that in December last year, Alibaba Group invested $10 million in the California-based game console maker Ouya, according to unnamed sources.

It is thought that the investment could help Ouya find new life in the China market after the company struggled to maintain traction following its record-breaking Kickstarter campaign in 2012.

According to the report, the two companies have discussed plans to incorporate Ouya's software and games library into Alibaba's set-top box.

Alibaba Group has made a habit of investing in US-based technology companies, including pumping $214 million in March last year into a $280 million investment round for Tango, the Californian messaging app developer of the same name.

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