HONG KONG: Alibaba.com, the largest business-to-business e-commerce company on the mainland, said net earnings in the first quarter fell 16 percent year-on-year, dragged down by a spike in several operating costs and reduced fees for product listings.

It said net profit in the quarter to March dropped to 253.4 million yuan from 300.7 million a year earlier, although revenue rose 18.6 percent year-on-year to 806.6 million yuan.

Increased spending on technology developments and marketing costs, relating to signing up of new subscribers, weighed on its first quarter performance.

Boosted by the increase in paying members, Alibaba.com's revenue on the mainland leapt 39.4 percent to 301.1 million yuan, compared with an 8.9 percent increase to 505.6 million yuan in its international market.

Overall paying members also surged 47.2 percent year-on-year, to reach 481,474 in the first quarter. The number of registered users on the mainland grew 4.86 percent year-on-year to 31.63 million in the first quarter.

Alibaba.com chief executive David Wei told reporters during a teleconference yesterday that investors should not be unduly concerned with the company's performance in the first quarter.

"This year is a period for investments for us. We'd like to achieve growth in user numbers," he said.

Wei said Alibaba.com has mapped out a three-year strategic plan that will underpin the group's future growth.

Under this plan, the company aims to improve its earnings and gross profit margin in the second and third quarter this year.

"It may take three years or more for us to achieve the objectives of this strategic development plan," he said. "Our investment from the second to the fourth quarters will far exceed what we have plowed in the first quarter."

Patrick Shum, chief portfolio strategist at Karl Thomson Securities, said Alibaba.com's earnings performance strongly correlates with the external economic environment. He expects Alibaba.com's earnings this year to remain sluggish, as impacted by the global economic recession.

"The company's strategy of investing amid adverse economic conditions is good although it might take one to two years for the global economy to recover," Shum said.

The new subscription fee of $2,999 will apply only to new members outside the Greater China region who sign up after June 15.

Against the 2.58 percent jump in the benchmark Hang Seng Index, shares in Alibaba dropped 0.77 percent, or HK$0.08, to close at HK$10.26 yesterday.

(HK Edition 05/07/2009 page16)