Yahoo’s Sina Courtship Speculation Continues

UPDATED: Yahoo and Sina are again the subject
of merger speculation after executives from the U.S.-based Web portal
visited the Chinese mainland this week.

Daniel Rosensweig, Yahoo COO, and Jeff Weiner, Yahoo senior vice president
for search and marketplace, vowed to enlarge the company’s Chinese
investments and introduce new products, according to the People’s Daily Online. The announcement comes amid speculation in the markets that Yahoo was looking to acquire Sina and online games operator Shanda Interactive .

Rosensweig did say China has “tremendous market opportunities,” according to
the report, though he declined to comment on the rumors.

Scott Morris, a Yahoo spokesman, said that as a publicly traded company, officials
can’t comment on rumors or speculation.

Last month, Shanda took a 19.5 percent stake in Sina, sparking takeover speculation in the Chinese markets. Officials at Sina also announced at
the time it had adopted a shareholder rights plan and was buying back its
own stock.

The Sina courtship by Yahoo, and the speculation surrounding it, has been a
topic of some debate in recent times. The two companies have extensive
business dealings with each other, primarily through a joint-venture online auction
formed last year.

The company also has a couple of other China-centric offerings in the
region. Outside its Chinese Web portal, Yahoo has a Chinese language and
context only search engine, called YiSou, and in January 2004 the company
finalized its $120 million
of Hong Kong-based 3721 Network Software.

Morris said its activities in China are consistent with Yahoo’s
international business strategy.

“Our Chinese marketplace experience within that economy beautifully
illustrates buy, build [and] partner,” he said. “We planted a flag down in
the soil there, built our own Chinese business operations using our
pre-existing technology, we added to that with a joint venture with Sina and
then we acquired 3721.”

For Yahoo, the importance in having a regional Web portal partner was
underscored by the findings in the China Internet Network Information
Center’s (CNNIC) annual report on Internet development, released in January.

The report found that for the approximately 94 million Internet users in
China, an overwhelming majority (82.6 percent) of those surveyed visited
domestic Chinese-language Web sites over its English-language counterparts
(4.7 percent). The report also showed that search engines were the most
popular (70.7 percent) form of information-obtaining approaches in the
populous country.

U.S.-based online sites are showing an increasing interest in buying into a
local presence in China.

Earlier this year, online auction giant eBay told investors it would spend $100 million to build up a competitive presence
in the country, because, eBay CEO Meg Whitman said at the time, “the money
is pouring in, and the competitive landscape is dynamic,” in China. In
2003, eBay acquired China’s EachNet for $150 million.

In August 2004, e-commerce site bought into a
regional player of its own with the $75 million acquisition of, China’s largest online retailer of books, music, videos and DVDs.

The deal re-ignited speculation in the U.S. markets that Yahoo could make a play for Sina, though the Chinese company’s $1.15 billion market cap at the time meant it would have been an expensive proposition. The company’s market cap currently stands at $1.63 billion.

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