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Alibaba Posts Strong Q3 Financials, Outlines M&A Strategy

Revenue climbs 54% at Chinese e-commerce and media giant, which has been exploring entertainment deals

Alibaba Group, the Chinese e-commerce and media powerhouse that’s been scoping out potential Hollywood deals, reported financial results for the third quarter of 2014 that beat Wall Street expectations in its first quarter as a publicly traded company.

Total revenue climbed 54% year over year, to $2.74 billion, which included a 1020% surge in mobile revenue to $606 million. Net income fell 39% to $494 million, which Alibaba said was primarily due to a significant increase in share-based compensation expense and amortization of intangible assets.

Alibaba, which raised $25 billion in a record IPO in September, generates most of its coin from e-commerce. But it’s also looking to use its huge cash reserves to expand entertainment interests.

Last week, Alibaba founder Jack Ma met with Sony Pictures execs to explore the possibility of co-financing movies, and the Chinese company is reportedly interested in buying a 37% stake in Lionsgate.

On a call with analysts Tuesday, Alibaba executive vice chairman Joe Tsai discussed the criteria the company uses in making decisions about investments and acquisitions.

“No. 1, we always like opportunities that will allow us to add more users, and ability to turn them into e-commerce users,” he said. The second factor is about enhancing the user experience, while the third is looking at expanding into additional product and service categories “that will enhance our position in getting the consumer’s wallet share.”

One potential takeover target: Youku Tudou, a Chinese video-streaming service in which Alibaba already owns a 16.5% stake. Last week, the companies announced a pact to drive adoption of “big data” for marketing in China.

Shares of Alibaba, listed on the New York Stock Exchange, were up 2.8% in mid-afternoon trading Tuesday, to $104.66 per share. That gives it a current market valuation of more than $256 billion.

In the third quarter, Alibaba’s China retail marketplaces had 307 million annual active buyers over the prior 12 months, versus 202 million in the 12-month period ended Sept. 30, 2013.

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