Yahoo-Alibaba Feud Over Spinoff of Alipay

Jack Ma, Alibaba CEO, and his rocky relationship with stockholder Yahoo.

ByBen Forer
May 16, 2011, 10:36 AM

May 16, 2011 -- Yahoo and Alibaba, China's largest e-commerce website, are at odds after Alibaba announced it had spun off Alipay, the company's online payment service. Yahoo holds a 43 percent stake in Alibaba, and news of the spinoff caused its stock to fall, as investors fear it could weaken Yahoo's stake in Alibaba.

Spining off Alipay allowed Alibaba Group's CEO Jack Ma to transfer ownership of Alipay to one of his other companies.

The two companies disagree about when Alibaba notified Yahoo of the spinoff. Alibaba said it told Yahoo in July 2009, while Yahoo said the change in Alipay's ownership took place last August, and Alibaba did not alert Yahoo until March 31.

The tech giants issued a joint statement Sunday reaffirming their commitment to work through the issue.

"Alibaba Group, and its major stockholders, Yahoo and Softbank Corp., are engaged in and committed to productive negotiations to resolve the outstanding issues related to Alipay in a manner that serves the interests of all shareholders as soon as possible," the statement said.

Ma has had a rocky relationship with Yahoo ever since Carol Bartz became CEO in January 2009. Analysts believe the Alipay move could allow Ma to have more negotiating power if Yahoo attempts to sell its share of the company.

ABC News' Diane Sawyer interviewed Ma last November, and the Chinese billionaire spoke about how China's philosophy has become more American.

"I think it is the American dreams that make America different," Ma said. "Today, Chinese people have the dreams. ... Many years ago, we would wait for the government, now we don't wait for the government."

Ma was born in the eastern city of Hangzhou, which is now the home base for his company and its 22,000 employees. He started his business after he visited the U.S. in 1995 as part of a trade delegation and saw the potential of the Internet. Ma believes America's culture of ingenuity and entrepreneurship is a model for the Chinese.

"Innovation is a culture. When I see the American culture, the American culture is very innovative," Ma said. "To have a culture of innovation takes about two or three generations."

The Associated Press Contributed to this report.

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