Chinese company loses nearly $50 billion in market value

Written by CNN Staff Writer

Investors in Chinese e-commerce and cloud services company Alibaba have lost at least $40 billion in market value after the company posted a 43% slump in first-quarter profit.

Xiaomi CEO Lei Jun welcomed the surge in Xiaomi’s stock. Credit: Xiaomi

The company, which posted disappointing earnings last year after a 51% slide in share price, announced Friday its fiscal first-quarter profit fell to $756 million from $1.6 billion in the same period last year.

Its revenue, which rose 31% to nearly $12 billion, also fell short of forecasts. Revenue from mobile services jumped 69% year-on-year, however it would have risen by 42% if the impact of taxes and money spent on upgrading user registration data had not been included.

The China Securities Regulatory Commission and markets regulator Securities Association of Hong Kong said in a statement that the results do not meet the minimum standard, but that it will “discuss with Alibaba the issue and take appropriate measures” if necessary.

A spokesperson for Alibaba said the company continues to anticipate that 2018 will be a year of “underlying growth,” despite the “erosion” of last year.

“In recent years, our company and our core market has been intensely competitive. In this competitive environment, we have seen increased spending on both new customers and marketing. We continue to invest heavily in customer acquisition and continue to invest in our people and technology to build out the Alibaba ecosystem,” the spokesperson said.

Analysts at Bloomberg said they believe a series of investments in tech companies that impact its margins and drive revenue growth have weighed on the company’s finances.

The company reported a major acquisition in March that’s set to reduce profit margin as it buys back shares. It reported the acquisition will cost it about $8.5 billion by September, paying about $6.4 billion to acquire eBay’s Southeast Asian business. It will see it gain control of 51 million customers in six markets that eBay had originally made available.

Founded in 1999 by billionaire Jack Ma, Alibaba is China’s biggest e-commerce platform and was considered to be China’s answer to Amazon.

Founded by tech industry star Lei Jun, Xiaomi sells mobile devices and data as hardware and cloud computing.

Earlier this week Xiaomi reported an unexpected surge in revenue and profits as it continued to expand into new areas of technology.

Last month Lei held an ‘eye bank’ in China, where more than 120,000 pairs of colored contact lenses and 3,000 pairs of glasses were collected from a public drive intended to raise awareness about global eye diseases.

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