With investors preoccupied by the ongoing search-engine wars, Yahoo! (NASDAQ:YHOO) has gotten little respect lately. Nonetheless, the Internet giant has taken up a 10% stake in an expanding e-commerce company in the large and growing Asian market.
Despite the G in South Korea's Gmarket, the company has nothing to do with Google (NASDAQ:GOOG). Yahoo! is buying a $60 million stake in Gmarket from venture-capital firm Oak Investment Partners, according to an Associated Press article. Gmarket filed for an IPO on Wednesday as well; investors can dig a little deeper into its story by perusing the IPO filing.
It's easy to see why Yahoo!'s interested. E-commerce giant eBay (NASDAQ:EBAY) already has a major presence in South Korea; in fact, in its latest 10-K, eBay said that its international business has become critical to its sales and profits, especially in the German, U.K., and South Korean markets. (Dig further in the annual report, and you'll find that Gmarket is eBay's major competitor in South Korea. Considering the recent strategic alliance between Yahoo! and eBay, all seems fair in love and war.) South Korea is one of Asia's largest online markets, with an $11 billion market for online shopping. It makes sense that any Internet company would want a piece of it.
A quick peek at Gmarket's preliminary registration statement reveals that this e-commerce IPO won't remind you of the bubble days -- it's already profitable. In 2005, Gmarket reported net income of $5.24 million and sales of $72.4 million. (That could change, though; 2005 was the first profitable year in Gmarket's history.) In April, Gmarket had 15.3 million average monthly unique visitors, and more than 8.6 million registered users.
Targeting a player in a major market like South Korea is a logical move for Yahoo! eBay got in there years ago, which makes one wonder why Yahoo! waited so long, but better late than never. Although the company's share price has tumbled since the beginning of this year, investors may want to think twice before underestimating Yahoo!.
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Alyce Lomax does not own shares of any of the companies mentioned.
