Alibaba.com, which could soon be taken private by its founder Jack Ma, posted a first profit decline in more than two years as a weak global economy hit the number of paying members for its services.
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The company, which operates an e-commerce website linking Chinese businesses to overseas buyers, warned its financial performance and membership growth could be dented further as it shifts to a value-added-services model from a subscription-based service.
"The company is undergoing a business transition, and I think things will start to probably recover in 2013," said Dick Wei, a Hong Kong-based analyst for J.P. Morgan.
Alibaba.com's parent, Alibaba Group, has signed a $3 billion loan giving it the money it needs to buy out the unit, sources told Thomson Reuters publication Basis Point on Monday.
Ma has been trying to buy back a large stake in Alibaba Group held by Yahoo Inc, but talks on a complex asset swap have been deadlocked.
Taking Alibaba.com into private ownership was not a pre-requisite for any broader deal for Ma to buy back the Yahoo stake, sources with knowledge of the talks have said.
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Alibaba.com's paying members fell 2.8 percent in the fourth-quarter to 765,363 as international buyers have become less active due to the euro zone debt crisis and a weak recovery in the United States. The e-commerce firm's exposure to international markets makes its turnover sensitive to the performance of major economies.
"We cautiously head into 2012 as the outlook for the global economy remains murky," Alibaba.com's chief executive Jonathan Lu said in a statement.
October-December net profit fell 6 percent to 385.95 million yuan ($61.3 million) from 410.4 million yuan a year earlier, roughly in line with forecasts from two analysts polled by Thomson Reuters I/B/E/S. It was the first quarterly profit fall since the 2009 third quarter.
Quarterly revenue grew 9 percent to 1.66 billion yuan, including a 7.3 percent increase in revenue from its international marketplace, to 945.6 million yuan.
Alibaba.com is 73 percent-owned by Alibaba Group, which in turn is 40 percent-owned by Yahoo, which bought its stake for about $1 billion in 2005. The remaining 27 percent of Alibaba.com is held by investors including Morgan Stanley , Vanguard Group and Capital International, according to Thomson Reuters data.
Local media have reported Alibaba may offer to take Alibaba.com private at about the HK$13.50 per share price of its 2007 initial public offering, valuing the listed unit at just under $9 billion.
Sources told Reuters last week that talks between Alibaba and Yahoo over a so-called cash-rich asset swap deal broke down over how best to value Taobao, Alibaba's fast-growing online retail business.
Alibaba.com shares have been suspended since Feb. 9 pending an announcement by its parent. Sources told Basis Point this week that a statement on the $3 billion loan deal could come as early as Wednesday.
Alibaba.com's stock was last quoted at HK$9.25, a 12-week closing high, though the shares have fallen 30 percent from last July.
($1 = 6.3017 Chinese yuan) (Reporting by Melanie Lee and Lee Chyen Yee; Editing by Ian Geoghegan and Jacqueline Wong)