UPDATE 4-Yahoo says makes headway in Alibaba talks
* Yahoo executives in Asia last week for negotiations
* Yahoo CEO defends disclosure relating to Alipay transfer (Adds executive comments, updates stock price)
By Alexei Oreskovic
SAN FRANCISCO, May 25 (Reuters) - Yahoo Inc (YHOO.O) said it has made significant progress in resolving a dispute over the online payments unit of Alibaba Group, a Chinese Internet search company whose founder took control of the prized business.
Yahoo co-founder Jerry Yang and Chief Financial Officer Tim Morse flew to Asia last week to thrash out the issue with Alibaba, which is 43 percent-owned by Yahoo. Another Alibaba investor, Japan's Softbank (9984.T), also participated in the meeting.
The revelation this month that Yahoo's Chinese partner had abruptly handed Alipay -- one of Alibaba's crown jewels -- to a company controlled by Alibaba founder Jack Ma sent the U.S. company's shares tumbling 12 percent.
"There're a lot of moving parts but we're making progress," Chief Executive Carol Bartz told investors at an annual analysts' meeting on Wednesday. "We're not going to get into a public back and forth."
Investor attention has focused squarely on Yahoo's Asian assets. Yahoo also owns 35 percent of Yahoo Japan Corp (4689.T).
Yahoo and Alibaba have sported a somewhat turbulent relationship. Observers say Yahoo has bristled at the way it has been sidelined on major decisions -- the surprise move to separate off Alipay being the latest example -- while Ma's company has been rebuffed by Yahoo in attempts to buy back some of the U.S. company's invested stake.
Some investors believe those assets could potentially be worth as much as Yahoo's entire current market value and are betting that an IPO by privately held Alibaba, or one of its subsidiaries, could boost Yahoo's valuation. In the past, investors have also called for Yahoo to sell off part of its investments and buy back its own shares.
Yahoo's stock rose as much as 5.3 percent, or 85 cents, on Wednesday but ended the regular trading session up a penny at $16.15.
ALL ALIPAY, ALL THE TIME
Yahoo executives spent the first 45 minutes of the company's annual analyst day event addressing the Alibaba situation before proceeding to planned presentations about the strategy for Yahoo's core, U.S.-based Internet business and its efforts to revive stalled revenue growth.
Bartz, who joined Yahoo as CEO in 2009, said the company had made progress in its efforts to revitalize the Internet pioneer.
"I know it's somewhat very popular to say Yahoo is not turning around. But we have 14,000 people and a management team that's working very, very hard to do just that," Bartz said. "I would insist that you give us some credit for turning this company around," she later added.
Still, executives conceded that problems with a partnership with Microsoft were crimping search advertising revenue and weighing on the company's long-term financial targets.
CFO Morse said Yahoo could achieve its targeted 7 percent to 10 percent revenue growth range in 2012 and 2013, even though he acknowledged that Yahoo was behind on its goal of hitting the target growth rate this year.
The revenue shortfall means that Yahoo is also not making as much progress as it expected toward its target of 27 percent to 33 percent adjusted operating margins by 2013, even though margins have expanded in recent years.
Yahoo is one of the most popular destinations on the Web and the No. 1 provider of online display ads in the United States, but the company is facing increasing competition from social networking service Facebook and continuing pressure from search leader Google Inc (GOOG.O).
Morse also said the company was making progress with plans to "unlock value" from its stake in Japan, noting that Yahoo was exploring three scenarios: creating a tracking stock, spinning off its investment and an unspecified "other" option.
Executives described the process as complex, echoing separate negotiations under way with Alibaba.
Alibaba has said that the Alipay transfer was done to meet Chinese regulations regarding foreign ownership of online payment companies.
Yahoo executives repeatedly stressed that all parties in the negotiations agreed on basic principles, particularly to ensure that Alipay would continue to be a driving force behind auctions site Taobao -- Alibaba's key strategic asset -- and that the payments system would be among the first to win an operating license from the Chinese government.
Bartz also said all agreed that the Alibaba Group -- and hence Yahoo -- would receive adequate "compensation" for Alipay.
Feeling the pressure from complaints that Yahoo was too slow in announcing the asset transfer, Bartz said its disclosure was "timely and appropriate."
And she stressed, with a hint of exasperation in her voice, that Yahoo was genuinely trying to resolve the "problem" with its various Asian assets.
"I would like nothing more than for you to focus on Yahoo Inc...us... because that's what this management team is working so hard for," she told the analysts at the event.
"It's very hard to come to a meeting and 50 minutes of it is Asian assets and 10 minutes is Oh yeah, what's Yahoo doing." (Additional reporting by Edwin Chan; Editing by Gerald E. McCormick, Tim Dobbyn, Bernard Orr and Steve Orlofsky)
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