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Facebook Messenger Becoming A Swiss Knife That Could Poke Apple

Facebook ( FB ) is in position to make its widely popular Messenger platform an all-in-one tool that could include a partnership or a battle with Apple ( AAPL ) and its Apple Pay system. An investigation by The Information found software codes inside Facebook Messenger that could enable the messaging service to handle in-store purchases, among other features. Messenger currently allows people to send cash between users. But data from Apple iOS code examined by The Information suggest Facebook could provide users the ability to pay for goods in person. Facebook has gradually increased the features in Messenger, such as live video calling or the ability to request a ride from Uber. During Facebook’s quarterly earnings conference call in January, CEO Mark Zuckerberg said newer services would include the ability to book airline tickets, as well as new payment features. But rather than proving its own payment service, Zuckerberg suggested a partnership. “We don’t view ourselves as a payments business, that’s not the type of company that we are,” Zuckerberg said on the call. “We’ll partner with everyone who does payment. We look at the stuff that Apple is doing with Apple Pay for example as a really neat innovation in the space that takes a lot of friction out of transactions as well.” He noted that small tests began about one year ago with some e-commerce services, so that people who bought goods could follow up with customer service or purchase more goods. “We started off pretty slowly, but that’s going to be some of the basis for how we look to make Messenger a business going forward,” Zuckerberg said. “And we’re happy with the initial results.” Facebook Messenger As Payments Vehicle Unclear By entering the mobile payments fray, Facebook could either partner or compete with Apple, Android Pay by Alphabet ( GOOGL ) and other services. “There is clearly the potential for Messenger to be used as a payment mechanism,” wrote Richard Windsor, an analyst at Edison Investment Research, in a research note. “This is all well and good, but the real secret to payments is not the app but the back-end and fulfillment, and how this will work is unclear.” Facebook rivals in Asia, such as WeChat from Tencent Holdings ( TCEHY ) and Alipay from Alibaba ( BABA ), already provide the ability to pay for goods through the app platform. “Although this is virgin territory for Facebook, its Asian rivals have been on this path for quite some time,” Windsor wrote. He said Facebook will face some challenging obstacles in expanding its Messenger features to new areas, but said it’s on the right track. “We see Facebook expanding into media consumption, shopping, gaming and search which will give it over 80% coverage of the Digital Life pie and market leadership,” Windsor wrote. “However, it is one thing to cover the pie and quite another to monetize it. Assuming that Facebook gets it right, it is on the way to create a thriving ecosystem that according to Edison estimates could allow it to double its revenues over the next five years or so.” Facebook stock was up 2%, near 116, in afternoon trading in the stock market today . Facebook is trading comfortably above its 50-day moving average as it works on a new base with a 117.69 buy point.

Yahoo Bidders Get April 11 Deadline, Must Unveil Financial Details

Yahoo ( YHOO ) is facing interest from as many as 40 groups and has set an April 11 deadline for any preliminary bids on its core Internet business and Asian assets, according to media reports Tuesday. Yahoo is sending letters asking suitors for bids, said a report in the Wall Street Journal. Bidders reportedly are being pressed on financing details along with conditions for a deal, including tax implications for separating Yahoo’s Alibaba Group ( BABA ) and Yahoo Japan assets from the core. Some buyers may be only interested in Yahoo’s core Web business in whole or in pieces, the report said, and some might bid for Yahoo’s 15% stake in China e-commerce giant Alibaba   or Yahoo’s holdings in Yahoo Japan. Yahoo wants to thin the field to serious potential buyers, the WSJ said. Yahoo is under pressure to get an auction process moving before this summer, when its shareholders will vote on whether to sweep out Yahoo’s current nine-member board and replace them with a slate proposed last week by activist investor Starboard Value. The hedge fund launched a proxy battle after criticizing Yahoo’s financial performance and slow movement toward a sale. Meanwhile, “any bids for Yahoo’s core business will show a discounted price target, and may not want to include Yahoo Japan assets if it’s from a domestically focused company,” wrote Rosenblatt Securities analyst Martin Pyykkonen in an industry note Tuesday. He added that “potential private equity buyers would seek a lowball price, with the plans of splitting the company even more so than just the core Yahoo assets from the stakes in Alibaba and Yahoo Japan.” This week, reports said  Microsoft ( MSFT ) might put up “significant” financing in a bid for Yahoo. Microsoft executives are in talks with potential investors about providing funds to buy the troubled Internet company , Re/code reported. A Reuters report said those talks are in the early stages. Microsoft and Yahoo have a longstanding search and ad partnership, and Microsoft is focused on preserving that relationship, it said. Private equity firms interested in Yahoo have approached Microsoft, Reuters said. In 2008, then-Microsoft CEO Steve Ballmer tried to buy Yahoo for about $45 billion. But Yahoo’s core business has since weakened, Pyykkonen wrote. “Fast forward to today, and there are declining fundamentals in Yahoo’s core business, which include user and usage year/year declines and a write down of a portion of Yahoo’s Tumblr business,” he said, as Facebook ( FB ) and Alphabet ( GOOGL )-unit Google both have more revenue concentration from mobile advertising. “Based on yesterday’s closing prices, Yahoo’s core business and its minority stake in Yahoo Japan were valued at $3.43 billion, based on the majority of Yahoo’s market cap being in its Alibaba stake (16% = $30 billion). We see any potential sale of Yahoo’s core business as being a long and protracted process (due diligence, price negotiation, proxy battle, etc.) through much of this year and with limited upside, if any, from the current stock price,” said Pyykkonen. Yahoo stock was up 2.5% in midday trading in the stock market today , near 36. Shares of Alibaba, Facebook, Alphabet and Microsoft were all up about 1% midday Tuesday.

NetEase Sees Dip In Mobile And PC Games, Gets Hurt By Tax Change

China gaming company  NetEase ( NTES ) is being hit by declining user activity for both its PC and mobile games and an “unfavorable” tax rate change, according to an analyst. “Cross-border commerce continues to grow, but we are cautious on likely negative catalysts, including government regulations, currency exchange fluctuation and intensifying competition,” wrote ITG Investment Research analyst Henry Guo in a research note Monday. Seasonality and competition are offsetting the company’s cross-border e-commerce momentum in Q1, he said. “Longer term, we continue to see multiple potential risks to NetEase’s e-commerce efforts, considering the uncertainties related to government policy and tax regulations on cross-border commerce and increasing competition from established e-commerce players in the market,” Guo wrote. NetEase stock closed Monday at 140, down 3.1%. NetEase stock has risen 36% in the past 12 months but is down 22% since early January. Shares touched a record high above 186 near the end of 2015. Three China tech firms — Internet search leader Baidu ( BIDU ), e-commerce king Alibaba Group ( BABA ) and Tencent Holdings ( TCEHY ), China’s leader in messaging and gaming — lead the way in China’s Internet arena. NetEase is another leader on China’s Web, as is e-commerce company JD.com ( JD ). The company said that revenue from online games, its biggest segment, more than doubled in Q4, thanks to growth in its original mobile games. The company’s “Westward Journey Online” and “Fantasy Westward Journey” came in as the top two games in the Apple ( AAPL ) iOS China app store in the fourth quarter, NetEase said. While the company now has multiple mobile games in testing, Guo said, few are available for public testing. “As such, we haven’t seen a step-up in game user activity in the quarter, which we attribute to a lack of promotions or incentives,” he said. Guo said he has modeled NetEase’s ad revenue to decline 10% quarter over quarter in Q1 2016, “a significant improvement from the year-ago period’s 18% quarter-over-quarter decline, reflecting NetEase’s heightened immunity to advertising seasonality, such as the Chinese New Year.” NetEase is best known for its desktop PC games and has had a lucrative exclusive license for Activision Blizzard ( ATVI )‘s “World of Warcraft” in mainland China since 2009. The company also develops its own games, mostly the multiplayer variety played on desktop PCs and mobile devices. Apple stock closed down a fraction at 105.19, while JD.com stock fell 2% to close at 25.82. Alibaba stock rose a fraction to close at 76.48, while Baidu stock rose a fraction to 185.17.