The share price of Alibaba dove almost 6 percent yesterday after Microsoft walked away from its multi-billion-dollar acquisition bid for Yahoo!, cooling investment sentiments over prospects of the Mainland B2B e-commerce portal.

Alibaba's 5.93 percent drop on the Hong Kong bourse cost shares HK$0.96, closing them at HK$15.24. The stock underperformed the territory's benchmark Hang Seng index, which dipped a slight 0.22 percent yesterday.

Kenny Tan Sing-hing, associate director of Tung Tai Securities, cited the Microsoft move as the one of the biggest reasons behind Alibaba's loss.

The e-commerce portal, of which Yahoo! is a major shareholder in, saw its shares shoot up 14 percent after Microsoft announced on Feb 1 that it wanted to buy Yahoo!.

Tang said there were major benefits for Alibaba, had the deal succeeded. "For one, Microsoft could have helped Alibaba expand its market share overseas," Tang said, adding that Yahoo! might have considered selling its stake in Alibaba at a high price in order to make the acquisition deal less attractive to Microsoft.

Microsoft announced it intended to buy Yahoo! stocks for $31 each, but the offer was eventually bumped to $33 to get the deal done.

Yahoo!, however, responded by saying it wouldn't accept less than $37 per share. So, Microsoft walked away.

However, First Shanghai Securities Strategist Linus Yip Sheung-chi said the negative impact on Alibaba's shares is mostly psychological. "Alibaba's market is still predominantly mainland oriented. So the failure of the Microsoft and Yahoo! deal has little real impact on the company's business," Yip said.

However, both Yip and Tang agreed that shares in the B2B e-commerce portal could see further slumps.

"Alibaba's PE ratio is still sitting at 70 times. Under such volatile market conditions, high-valuation stocks tend to have a more difficult time," Tang said.

Yip expects Alibaba shares to find support at about HK$14 to HK$15 per share. "The company's share price has gone up quite steeply, from HK$12 to HK$16 in the past weeks, so I expect there will be some downward correction," Yip said.

Alibaba was the most profitable IPO last year, with its shares surging 192 percent on its trading debut in November.

The mainland e-commerce company is scheduled to announce its first quarter results for 2008 today.

(HK Edition 05/06/2008 page2)