Yahoo! Codes, Reluctantly

Is Yahoo! (Nasdaq: YHOO  ) the next software powerhouse in China? Of all the paths that the search-engine pioneer has taken in growing its business over the years, staking a claim in a promising enterprise software venture in China seems out of place.

The company's past is dotted with more logical expansions into social bookmarking and photo-sharing sites. However, when Yahoo! shelled out $1 billion for a 40% stake in China's Alibaba, it knew it wasn't in the driver's seat. With 40% of the shares and only 35% of the voting rights, it has to trust Alibaba's direction.

Alibaba runs a B2B platform for Chinese suppliers to move their wares. To eBay's (Nasdaq: EBAY  ) chagrin, Alibaba has also been a rival-stomper with its popular consumer-based auction site (Taobao) and online payment site (Alipay). Even though Yahoo! hooked up with Alibaba to help grow the reach of its search-engine business in China, that has actually been a bust so far. Market leader Baidu.com (Nasdaq: BIDU  ) and distant silver medalist Google (Nasdaq: GOOG  ) are well ahead of Yahoo! China in that race.

Earlier this week, Alibaba expanded its reach by rolling out its new Alisoft division in Shanghai. Looking to make a dent in corporate software with an e-commerce bent, Alibaba is aiming well. Its Rolodex runs thick in new-economy leads, thanks to the success of its namesake site.

The move won't affect Chinese software companies like NetEase (Nasdaq: NTES  ) and The9 (Nasdaq: NCTY  ) that specialize in fantasy games. There's a bigger chance that Alibaba will eventually butt heads with Ninetowns (Nasdaq: NINE  ) and its import/export software stronghold. Either way, Yahoo! gets to go along for the ride. Reluctantly? Perhaps. Will it regret the move, if these are the seeds that ultimately make it a more popular search engine in the corporate space in China's booming economy? Not a chance.

eBay and Yahoo! are active recommendations in the Motley Fool Stock Advisor newsletter service. Baidu and NetEase are picks in the Rule Breakers growth stock research offering. Whatever your investing style, we have a newsletter for you!

Longtime Fool contributor Rick Munarriz is a frequent Yahoo! visitor, but he does not own shares in any of the companies mentioned in this story. He is also part of the Rule Breakers newsletter research team, seeking out tomorrow's ultimate growth stocks a day early. The Fool has a disclosure policy.


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