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E-Commerce Company Alibaba's Earnings Double

Top Chinese e-commerce firm Alibaba.com more than doubled its first-quarter earnings, beating forecasts, on strong demand for online trade and improved profit margins due to successful cost management.

Alibaba, in which U.S. Internet company Yahoo is a key investor, said on Tuesday that the slowing U.S. economy would continue to pose challenges to the global trading environment.

"But we believe we are well prepared to mitigate the potential effects by continuous development of our China marketplace as well as focusing on industries and regions less likely to be affected," Chief Executive Director David Wei said in a statement.

Alibaba, which operates an online business-to-business site connecting firms looking to import and export Chinese goods, reported a net profit of 300.7 million yuan ($43 million) for the three months ended in March, up from 142.1 million yuan in the same period in 2007.

That beat quarterly earnings forecasts of 263 million to 290 million yuan, according to two analysts polled by Reuters.

News that the world's biggest software maker Microsoft dropped a bid for Yahoo knocked Alibaba shares down 6 percent on Monday.

The stock jumped 12.5 percent to a four-week high last Friday amid talk that Microsoft might raise its Yahoo bid.

But Microsoft abandoned its bid on Saturday after failing to agree with Yahoo on pricing.

Yahoo owns 39 percent of Alibaba's parent, Alibaba Group, and Microsoft's failure to win Yahoo means potential business opportunities Alibaba might have had with Microsoft, such as in advertising or online trading, would not now likely materialize.

Slowing Economy

Its shares, listed in Hong Kong in November after ranking as the city's most popular IPO last year, rose 1.05 percent on Tuesday, outperforming a 0.3 percent gain in the blue-chip Hang Seng Index.

Analysts showed concern about Alibaba's premium membership growth, as well as the impact of yuan appreciation and a slowing U.S. economy on its customer renewal rate.

But Alibaba, looking to serve small- to medium-sized businesses, shrugged off the threat of a slowing global economy, saying this could instead be an opportunity for itself and its customers.

"E-commerce helps small and medium-sized companies to control costs, to source better and make better profits. It could enable them to survive," Alibaba CEO David Wei told reporters after a shareholder meeting in Hong Kong on Monday.

Its shares lost more than two-fifths of their value in the first quarter amid a global stock selloff and on concern about the growth of its premium memberships amid a slowing U.S. economy.

It underperformed an 18 percent loss in the blue-chip Hang Seng Index in the same period.

Citigroup downgraded Alibaba's stock twice last month to sell from buy, saying the expiration of a lock-up period for IPO shares in early May would create an additional negative overhang for the stock.

"We believe that now is the right time for Alibaba.com to scale up in other markets such as India, though we believe that the company will need to sell higher-yielding Gold Supplier memberships directly to build a market-leading position," James Mitchell, an analyst at Goldman, said in a recent research note.

The company announced last week that it would join forces with an Indian business magazine and telephone directory publisher, Infomedia, to develop an online trading platform for Indian companies.

Alibaba has more than 400,000 members in India with more than 20,000 India companies signing up each month since January 2008.

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