Kara Swisher

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Yahoo-Alibaba-SoftBank Settlement Call: At Least It’s Not 100 Percent of Zero!

As these companies are wont to do in the middle of the night, Yahoo, SoftBank and the Alibaba Group have reached an agreement in their nasty dispute around the Alipay payments unit, and they are ready to talk about it.

Well, not Alibaba’s CEO Jack Ma (pictured here), Yahoo’s CEO Carol Bartz or SoftBank’s Masa Son, but their functionaries are all set to discuss the deal.

The issue has revolved around the spinning out of Alipay by the Chinese Internet giant Alibaba, without the approval of large stakeholders Yahoo and Japan’s SoftBank, which the pair felt was a big no-no.

Much mishegas followed, but the trio has been hard at work on a settlement, which is here now.

Of course, had the three companies cooperated in the first place as joint owners and board members of Alibaba, this all would have been unnecessary.

5:48 am PT: The call starts without all kinds of regulatory info about what can and cannot be said, before being thrown to Yahoo CFO Tim Morse.

One interesting wrinkle is that SoftBank’s Ron Fisher cannot speak at all, due to some Japanese laws, which are unexplained. But, said Morse, he’s there to show his support.

Go, Ron!

Alibaba’s CFO Joe Tsai is up first to talk about the deal over Alipay, which he stresses does not really make much money now. As he says, it is “marginally profitable.”

Tsai walks through the facts that they have already outlined earlier today, including a variety of payments from Alipay to Alibaba, since — let’s be clear — it used to be part of Alibaba.

But Alibaba said it had to spin it out in order to get critical regulatory approvals from the Chinese government, which caused this mess.

Morse now comes on, noting the whole squabble really had “no direct impact” from a financial point of view on Yahoo or SoftBank at this time related to its Alibaba assets.

Well, shareholders of Yahoo might beg to differ, considering the huge hit the stock has taken due to the fight. Wall Street has long considered Yahoo’s Asian assets its most valuable part.

But Morse is pleased the complex agreement has finally been reached — I am guessing it was not easy to negotiate among three different countries with so much pressure.

5:59 am: Time for Q&A!

The first question is about more deets and also about the possibility of a liquidity event for Alibaba or its various units.

Tsai underscores that there might not be one or there might be one. In other words, the Chinese assets of Yahoo may or may not ever pay off.

The next question is about why Yahoo and SoftBank should have a cap on an asset they used to own 100 percent of. Good point!

Neither Morse or Tsai really answers the question, except for Tsai talking about how certain rules over foreign ownership of payment companies in China means it had to be like this.

“If you own 100 percent of the business that cannot operate, you own 100 percent of zero,” said Tsai.

Translation: That’s China, folks, so suck it up!

The next question is a promissory note, which Tsai says has value, even though it actually does not have value right now. China!

The analysts still are stuck on this fact that, under terms of the agreement, Yahoo will only get 37.5 percent of an IPO or other liquidity event, when it used to be owner of 100 percent of Alipay.

Good point: Will this happen to other Alibaba units, such as its Taobao commerce unit?

China is a good place to be, assures Tsai, which is cold comfort right now.

A lot of swirl around preferential terms in the deal for Alipay with Alibaba’s units, which seem to be the same as before. In other words, nothing has changed, except a lot of stock loss for Yahoo and less technical ownership of Alipay.

The Wall Street analysts on the line continue to be riveted to the idea of a liquidity event for Alipay and other Alibaba units, especially Taobao, and keep asking different versions of this question.

The last question is about more deets of the deal and new business ideas for Alibaba.

Tsai talks about a cloud-based system rolling out, for example.

The questioner moves to, you guessed it, a liquidity event.

“I don’t think we want to get into it at this point,” says Tsai.

Well, we do, but apparently Yahoo shareholders are not going to.

That said, the deal is finally settled, which has already given Yahoo shares a small bump today. And that’s not nothing.

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I think the NSA has a job to do and we need the NSA. But as (physicist) Robert Oppenheimer said, “When you see something that is technically sweet, you go ahead and do it and argue about what to do about it only after you’ve had your technical success. That is the way it was with the atomic bomb.”

— Phil Zimmerman, PGP inventor and Silent Circle co-founder, in an interview with Om Malik