Ebay Closes Chinese Site, Will Partner With Tom Online

Ebay is closing its Chinese operations after nearly five years of fighting a losing battle with local competitors. The company announced that instead it is starting a joint venture with Li Ka-shing. The world's largest online auction site will pay about $40 million for a 49 percent stake in a business connected with Li's Tom Online Inc., which sells cell phone ring tones. Tom Online will invest $20 million. The joint site will be launched next year. Ebay will maintain a site for Chinese consumers to do business with foreigners, in addition to a technology development center based in Shanghai. Tom Online's ADR shares climbed 12 percent in U.S. after-hours trading to $17.25. EBay shares were down 50 cents, or 1.5 percent, to $32.42. Ebay stock is down 25% for the year. Analysts were not surprised by Ebay's difficulties in China, citing cultural differences as a major cause of Ebay's failure.
• Sources: Bloomberg, Marketwatch.com, San Jose Mercury News
• Related commentary: eBay Watch: Week 11 Listings, Equity Stake in Tom Group and The Venice Project, eBay Watch: Executive Problems at Skype and News From the eBay China Rumor Mill, Online Traffic Trends: Monster and Expedia Falling Conference call transcripts: eBay Q3 2006 Earnings Call Transcript
• Potentially impacted stocks and ETFs: eBay (EBAY), TOM Online (TOMO) Competitors: SINA Corporation (USA) (SINA), NetEase (NTES), Amazon.com (AMZN), Yahoo! (YHOO) ETFs: First Trust Dow Jones Internet Index Fund (FDN), Internet HOLDRs Trust Internet HOLDRs Trust (HHH), Fidelity Nasdaq Composite Index Tracking (ONEQ)

Seeking Alpha's news summaries are combined into a pre-market briefing called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only a few seconds to sign up.