May 8, 2015
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Alibaba revenue tops bearish expectations, new CEO named

May 8, 2015

(Reuters) - Alibaba Group Holding Ltd on Thursday posted a 45 percent rise in quarterly revenue, and shares of the Chinese e-commerce company jumped nearly 7 percent as investors cheered a smoother-than-expected transition to mobile transactions, which surpassed those from personal computers for the first time.

The company said Chief Operating Officer Daniel Zhang would become chief executive on May 10, replacing Jonathan Lu. Lu was CEO for two years, a low-key leader who was frequently eclipsed by outspoken founder and Executive Chairman Jack Ma. Lu will remain on the board as vice chairman.

Alibaba's quarterly revenue jumped 45 percent to $2.81 billion, beating the average analyst estimate of $2.77 billion according to Thomson Reuters I/B/E/S. Shares jumped 6.9 percent to $85.54 at midday in the U.S. trading session.

"It was a very good quarter which is especially important considering there were a lot of expectations that the results would not come in strong," said Gil Luria of Wedbush Securities. "Sentiment is going to swing back to the favourable side."

Zhang takes the helm as the sprawling e-commerce company puts greater emphasis on reaching customers via mobile devices in China, the world's biggest smartphone market. The company did not explain the reason for the change but Executive Chairman Ma said in a letter to staff he was pleased to see the reins going to a leader born in the 1970s. Zhang was born in 1972 while his predecessor was born in 1969. Despite the change, Ma is seen as the driving force and the public face of the company. Analyst Tian Hou at Capital Research in Beijing said Zhang would be a thorough executive who executes well and believes in consensus. "He quietly gets things done," she said.

Despite the strong fourth quarter, the incoming CEO could face slowing growth as saturation among online shoppers threatens to hobble expansion, along with stiff competition from domestic rivals Tencent Holding Ltd, Baidu Inc and JD.com Inc on mobile.
The total value of transactions made on Alibaba's platforms, known as gross merchandise volume (GMV), grew 40 percent to $97 billion in the quarter ended March 31. This was the lowest rate of growth in at least 11 quarters, despite sales on mobile devices growing 257 percent year-on-year to account for 51 percent of overall GMV.

Alibaba may also be facing e-commerce user saturation. The increase of annual active buyers, or customers who buy at least one product a year via Alibaba, was the smallest in 3-1/2 years, up 5 percent from the previous quarter to 350 million.
The group will continue investing in areas such as digital entertainment, cloud computing and mobile Internet, Chief Financial Officer Maggie Wu told a conference call.

Zhang will also take on decelerating profit growth. Alibaba's net income excluding extraordinary and one-off items grew 16 percent year-on-year, a far cry from 48 percent growth the previous year and triple-digit gains in the 12 months before that.

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