Bottom line: A new alliance between Youku Tudou, Weibo and UCWeb, combined with reports of the imminent resignation of Youku’s CEO, point to a sale of Weibo parent Sina to Alibaba within the next 6 months.
Two new developments involving several Alibaba-backed (NYSE: BABA) assets are hinting at a major new shakeup in the firm’s online video and social networking (SNS) division, which could include an acquisition of stalwart web portal Sina (Nasdaq: SINA) that I’ve been predicting for a while. This particular series of corporate shuffles is quite complex, but does seem to hint that Alibaba is trying to rationalize and synergize some of its major web-based entertainment and SNS assets outside its core e-commerce business.
The major headline hinting at big change is a new announcement that SNS giant Weibo (Nasdaq: WB), online video leader Youku Tudou and popular web browser UCWeb will combine in a new alliance to find synergies for their businesses. UCWeb and Youku Tudou are both owned by Alibaba, which also owns 30 percent of Weibo.
Weibo, whose shares have quadrupled since February on strong operating results, quite openly admits that it derives a “significant portion” of its advertising and marketing revenues through its alliance with Alibaba, according to its latest annual report. At the same time, Weibo is actually controlled by Sina, which recently lowered its stake in the SNS unit to a bare majority of 51 percent. (previous post)
The other news item of interest is another report this week that Chinese Internet veteran Victor Koo was preparing to step down as longtime CEO of Youku Tudou, a highly popular but also money losing video service that he sold to Alibaba last year. The final piece to this puzzle is Sina’s own longtime CEO Charles Chao, who engineered the sale of 30 percent of Weibo to Alibaba 3 years ago and himself is looking for new challenges.
If we look at all these developments from a larger perspective, we could easily imagine a plan that would see Alibaba buy Sina, which would give it complete control of Weibo with 80 percent of the company. Part of such a deal could see Charles Chao become the CEO of a new company that combined Weibo, Youku Tudou, UCWeb and Sina into a single entity with an unusual array of assets in the online news, video and SNS spaces.
We’ll return to that bigger theme shortly, but first let’s review the latest actual news involving the new tie-up between Weibo, Youku Tudou and UCWeb, and the reports of Victor Koo’s resignation. The first item was actually announced at a big event sponsored by Youku Tudou. Victor Koo was present at that event and made a speech, but the actual alliance was announced by Youku Tudou President Yang Weidong. (Chinese article) Details of the alliance were rather vague, saying only that it would see some low-level sharing of data to integrate user experience between the 3 assests.
Role Change for Youku’s Koo
The second news item simply cites a Youku Tudou insider saying that Victor Koo will soon be resigning his position as the company’s longtime CEO, and will take up a new position leading one of Alibaba’s investment funds. (Chinese article)
A development related to my broader speculation that Sina might become an acquisition target occurred at the start of this year, when Sina reduced its board size to a just 5 members from a previous 7. (previous post) Such a move looked aimed at allowing Chao to get easier approval for a potential future sale of the company, since he would only have to win over 2 other members’ votes to get a majority from such a small board.
A look at Sina’s website shows its board continues to have just 5 members, a highly unusual situation for such a large company with a market value of more than $5 billion. What’s more, Sina’s own shares have soared by about 60 percent since mid-July, largely due to Weibo’s surge that is highly dependent on the Alibaba tie-up.
All those factors combined seem to tie Sina and Alibaba more and more closely together, and make a sale of the former to the latter look increasingly likely in the next few months. If that does occur, I would expect Sina’s Charles Chao to take over at the helm of a new entity combining Sina, Weibo, Youku Tudou and UCWeb.
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