Alibaba to Buy Yahoo? Don’t Bet on It. (YHOO)

It’s not the first time the rumor of Alibaba Group Holding Ltd (NYSE:BABA) looking to buy Yahoo! Inc. (NASDAQ:YHOO) has come up, but the timing was certainly more interesting than it usually is.

yhoo alibabaIn a post on a Chinese website discussing a new book about Alibaba, Founder and Executive Chairman Jack Ma is quoted about his long-standing interest in Yahoo and the problems inherent in getting a deal done with the U.S. internet giant.

Ma said that the acquisition of Yahoo’s something he worked on a couple of years ago, but that it remains a political, not economic problem. Because Yahoo is a media company, its acquisition by a Chinese behemoth is more sensitive, Ma is said to have told the author of the book.

They say that when there’s smoke on Wall Street, there’s fire. And although this rumor is so cold it isn’t even smoldering, the timing — coming as it does with Alibaba’s foray into the U.S. cloud computing business — probably raised at least a few eyebrows.

Alibaba launched a cloud computing hub in Silicon Valley Wednesday to go head-to-head with the likes of, Inc. (NASDAQ:AMZN), Google Inc (NASDAQ:GOOGL, NASDAQ:GOOG) and Microsoft Corporation (NASDAQ:MSFT), among others.

This is Alibaba’s first cloud computing hub outside China, and though it will initially cater to Chinese companies doing business in the U.S., Alibaba has big plans to expand the client base. After all,the cloud services industry will grow to $100 billion by 2017, according to research firm IDC, and having a perch in the U.S. will help Alibaba get its share of the pie.

Alibaba Looks to the U.S.

What does this have to do with Yahoo? Maybe not all that much, but an Alibaba acquisition of Yahoo would give BABA a second perch in the U.S market, one which could allow it to mine the lucrative market for digital ads, especially in the fast-growing mobile space.

Alibaba has made no secret of its desire to expand in the U.S., and the acquisition of a content player like Yahoo would certainly put it on the front lines of at least one online business. Whether Alibaba could rejuvenate Yahoo after so many years of stagnation remains the big question. After all, just what can Alibaba do to make this also-ran worth the billions it would take to buy it?

Maybe Jack Ma has plenty of ideas of what would work with Yahoo. As former partners, he certainly knows the company intimately.

But it seems far-fetched. Yahoo regularly finds itself the center of deal rumors that don’t pan out. The company even successfully rebuffed a hostile approach from Microsoft back in 2008.

And, then, as Ma said, there are delicate politics surrounding the matter. There no sense in creating political or public perception problems when BABA is trying to build a U.S. cloud business. Meanwhile, Yahoo is still struggling to grow. Indeed, revenue has been in steady decline since 2009.

Maybe it will happen one day … but it’s sure not worth betting on now.

As of this writing, Dan Burrows did not hold a position in any of the aforementioned securities.

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