February 10th, 2012
05:32 AM GMT
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Hong  Kong  (CNN) – When Internet giant Yahoo bought a 40% piece of Chinese business-to-business online company Alibaba in 2005, the $1 billion deal was hailed as a unique coup for the U.S. web site – and a quick way to get a stronger toehold among China’s then-100 million online users.

What a difference seven years makes.

In recent months Yahoo has seen its CEO Carol Bartz and founder Jerry Yang shown the door, followed this week of four board members – including the chairman – departing, as shareholders lose patience with the firm’s performance.

Meanwhile, Alibaba.com suspended trading of its shares in Hong Kong Thursday “pending clarification of speculation in relation to a transaction involving the controlling shareholder.” That transaction apparently is a move for Alibaba position itself to buy back its shares from Yahoo for a reported $6 billion in cash and asset swap, according to Reuters.

The deal underlines how valuable Yahoo’s holdings in Alibaba have become, and how frustrated Yahoo’s shareholders have become with the company’s lackluster performance.

Meanwhile, the fortunes of Alibaba have risen in tandem with China’s online market, which now eclipses the U.S. with 500 million people online. There was speculation Alibaba – which runs online B-2-B portals and Taobao, an e-commerce website often called “China’s eBay” – may even make a play for Yahoo. Those rumors gained steam after reports its parent company, Alibaba Group, hired a Washington lobbying firm late last year, presumably to head off likely saber-rattling over a Chinese internet firm becoming a player in the U.S. market.

Now online: Half a billion Chinese

Regardless of how the Yahoo deal pans out, it’s clear Alibaba is looking for a way to expand its reach into the North American market – a mirror image of Yahoo’s China strategy when it bought its Alibaba stake.

Filed under: AsiaChinaHong KongTechnologyUnited States


soundoff (10 Responses)
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    Why must we compare China's population as if it's some kind of business success. They have 500 million Internet users because they have 1.5 billion people.

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    Yahoo now? You got to be joking, It had its glory days around 1995-96 when everyone was using yahoo search engine but they missed the most important opportunity in a life time-to buy out Google when it was an infant.

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