Over the years, Yahoo! (NASDAQ: YHOO) has aggressively expanded into global markets, such as China (through Alibaba) and Japan (through Softbank). Now, the company is seeing opportunity in another large area: the Middle East.

Today, Yahoo! announced a deal to purchase Maktoob.com. The terms were not disclosed, but the rumors are that the price tag was between $75 to $80 million. Maktoob.com, which gets about 16.5 million unique users, has enormous amounts of local content -- in Arabic (the locations include Egypt, Jordan, Kuwait, Saudi Arabia, and the United Arab Emirates). In fact, the site reaches one-third of online users in the Middle East.

Yahoo!'s (NASDAQ:YHOO) big footprint in Asia could be a significant benefit to Microsoft (NASDAQ:MSFT) as it tries to gain market share from Google (NASDAQ:GOOG) in the region. Yahoo! owns large pieces of Yahoo! Japan and China e-commerce firm Alibaba. A takeover from Microsoft would give the world's largest software maker access to all of that.

According to Reuters, "If the deal goes through, Microsoft stands to gain a leg up over Google from cooperation with Alibaba's online software and Yahoo Japan's online customer base."

The theory may be based on soft reasoning. Yahoo! has been operating in the region for a decade and Google, which entered the market much later, has done fine. In Japan, Google is No.2 in audience behind Yahoo!, according to comScore. Google recently signed a deal to be the default search engine for NTT Docomo (NYSE:DCM) handsets. Docomo is the dominate cellular provider in Japan.

Microsoft may pick up relationships with web properties in Asia, but if its search product does not measure up to Google's that may not matter. Being better is the best way to get bigger. Buying in won't guarantee success.

Alibaba, the big Chinese e-commerce company is 39% owned by Yahoo! Inc. (NASDAQ: YHOO). That has been OK for Alibaba; Yahoo! has not taken any role in running the company. But, the firm and the Chinese government are a little worried that Microsoft Corp. (NASDAQ: MSFT) will not see it that way if it buys Yahoo!

According to The Wall Street Journal (subscription required), "Alibaba has already been contacted by Chinese regulators seeking information on how it could be affected by a Microsoft purchase." The concern is perverse for two reasons.

China thinks nothing of allowing its sovereign funds to put capital into U.S. financial companies. Congress has already begun to worry in public that the Chinese might exert unwanted pressure on the managements of some of Wall Street's biggest companies. The Chinese cannot have it both ways, buying into American businesses while setting limitations on investments in its country.

What is even more obvious is that one solution is to have Microsoft simply enter into a legal agreement that makes its shares in Alibaba non-voting. This allows the big software company the advantage of an investment that will probably grow in value, and one that it will probably eventually sell back to Alibaba or even to the Chinese government.

Why make the issue more complicated than it really is?

Douglas A. McIntyre is an editor at 247wallst.com.

The short interest in Yahoo! (NASDAQ: YHOO) fell by 11.8 million shares to 54.3 million between October 31 and November 15, according to figures from the Nasdaq. The stock has never really recovered from poor earnings late last year and the perception that Google (NASDAQ: GOOG) will suck up a huge share of internet ad dollars. Yahoo!'s stock was over $43 in early 2006, but now trades at only $25.59.

To some extent, believing that Yahoo!'s shares will rise is believing that all internet advertising will continue to rise quickly. Yahoo!'s quarterly numbers show that its revenue is actually not growing as fast as online advertising in general, a rate that is put at about 20% year-over-year. But the company has moved to make acquisitions that will allow it to target display advertising better, and its Panama search ad platform has received at least modest reviews from customers.

The problem with gambling that Yahoo! can do better is that its performance does lag online revenue in general, and there is a perception that a recession could slow the flow of all internet dollars. Yahoo!'s modest growth rate might get worse. And its share of the U.S. search market is not really improving. Yahoo! sits at about 20%, while Google's monthly numbers run closer to 60%.

The market was also excited about Yahoo!'s big stake in China e-commerce company Alibaba. The firm went public last month, and, at one point, the U.S. company's piece of the IPO was worth over $5 billion. But Wall Street figured out that selling such a large stake was impossible. And Alibaba's shares did drop.

Yahoo! may not be going up and some shorts may get burned.

Douglas A. McIntyre is an editor at 247wallst.com.

Alibaba more than doubled on its first day of trading in Hong Kong today. After the trading day ended, Alibaba took its place as Asia's second largest Internet company behind Yahoo! Japan. All in, Alibaba is now valued at over $23 billion.

With shareholders including Cisco Systems (NASDAQ: CSCO) and Yahoo Inc. (NASDAQ: YHOO), Alibaba joins other high-flying Asian IPOs in 2007. I wrote briefly yesterday about the PetroChina (NYSE: PTR) IPO, which after it saw its value triple, is now the world's first trillion dollar company.

Part of what makes the Alibaba IPO so interesting is the firm's growth prospects. China's largest Web trading site for companies predicts profit will almost triple this year on increased spending in the world's fastest growing major economy.

U.S. stock futures were higher this morning indicating stocks may be poised for a rebound at the open as investors focused on strength from the tech sector rather than financial sector woes, housing sector problems, the dollar skidding to yet another record low and oil once again near record highs.

Yesterday, U.S. stocks ended lower as Citigroup (NYSE: C) and after financials were hurt following Citigroup's early announcement of up to $11 billion in writedowns due to subprime . The Dow industrials fell 51 points, or 0.38%, the S&P 500 lost 7 points or 0.5% and the Nasdaq Composite lost 15 points or 0.54%.

No major economic data is to be released today.
Oil prices rose to $95.75 a barrel (near the $96.24 intraday high) today on expectations of further declines in U.S. crude oil stocks -- to be reported tomorrow -- fueling supply concerns ahead of winter.

When the market started to realize that Yahoo!'s (NASDAQ: YHOO) shares in China ecommerce company Alibaba were worth a great deal, the approaching IPO for the Asian company began to move the US portal firm's shares higher. Even after modest earnings, Yahoo! stock is up almost 40% in the last three months.

Alibaba's IPO did well, perhaps even better than expected. The Wall Street Journal says that Alibaba "nearly tripled from its initial public offering price on its Hong Kong debut Tuesday, exceeding market expectations as it shot to levels some analysts warned could be unsustainable."

Alibaba is now worth about $20 billion, and Yahoo!'s share of the company is roughly 40%. The portal company's entire market cap is $42 billion, so its stake in the ecommerce company is a significant contributor to the overall value of Yahoo!.

But there is a problem here. What the shares are worth on paper and what Yahoo! could get for them are two very different things. The shares could not be sold without driving down Alibaba's price. And Yahoo! may think that Alibaba could be helpful in building a better foothold in China for the US company.

The Yahoo! stake may look like it is worth $8 billion, but it isn't.

Douglas A McIntyre is an editor at 247wallst.com.

The IPO of Alibaba, the large Chinese e-commerce site, may show that the China stock markets are topping. The company appears to have raised $1.5 billion for about 17% of the company. This is good news for Yahoo! Inc. (NASDAQ: YHOO), which invested a billion dollars in the site, but it could also make the US portal look bad. If the China market moves down before Yahoo! can off-load some of those shares, its initial investment in the company may not look like a coup.

The astonishing thing about the Alibaba IPO is that, according to The New York Times, "the I.P.O. price translates to a multiple of 55 times its forecast 2008 earnings." The number serves to point out the fact that, even with its economy growing at 10% a year, sustaining P/Es at this level will become impossible, as it did in the Japanese markets and US internet stocks in late 1990s. Both of those bubbles led to corrections of more than 50%.

The Shanghai Composite Index is now up well over 200% this year. The bull argument for an ongoing increase is that the emerging China middle class needs a place to invest its money and cannot move that capital into overseas equities. That makes the market overly dependent on one set of buyers.

MAJOR PAPERS:

• According to a person briefed on the situation, Merrill Lynch & Co Inc's (NYSE: MER) CEO Stan O'Neal was negotiating the terms of his forced departure on Sunday and the departure is expected to be announced on Monday. The top contenders for the CEO position are said to be BlackRock Inc's (NYSE: BLK) CEO Laurence Fink and NYSE Euronext Inc's (NYSE: NYX) CEO John Thain, the Wall Street Journal reported.
• The WSJ also reported that Alibaba.com raised $1.5B after the company priced its IPO at HK$13.50, at the top-end of the HK$12-$HK13.50 range. Yahoo! Inc (NASDAQ: YHOO) holds a 39% stake in Alibaba Group.

OTHER PAPERS:

• Ness Technologies Inc (NASDAQ: NSTC) was awarded a contract worth NIS 5 Million to convert the pension fund data managed by Opal Future Technologies, Globes reported.
• Indian company Dr. Reddy's Laboratories Limited (NYSE: RDY) is set to attempt to raise its share of the U.S. over the counter drug market by partnering with at least six more U.S. retail chains; the company plans to launch up to 10 drugs over the next 12 months that could become OTC offerings in the U.S., the Economic Times reported.

WEB SITES:

• According to TechCrunch, IAC/InterActiveCorp (NASDAQ: IACI) may have submitted a letter of intent to acquire movie-centered social network Flixter over the last week or so.

Yahoo! Inc. (NASDAQ: YHOO) implied volatility up on expectations of Alibaba, Yang & EPS.

YHOO is recently trading $22.58. Recently, Alibaba.com, China's largest e-commerce company, hired NM Rothschild to advise it on a stock listing. YHOO has 40% ownership stake in Alibaba. YHOO is expected to report EPS on 10/16. YHOO over all option implied volatility of 38 is above its 26-week average of 35 according to Track Data, suggesting larger movement.

Rediff.com India Limited (ADR) (NASDAQ: REDF) volatility elevated as REDF trades near 52-week lows.

REDF, a provider of online consumer offerings, is recently up 30 cents to $15.07. REDF over all option implied volatility of 59 is above its 52-week average of 51 according to Track Data, suggesting larger price fluctuations.

Daily options Update is provided by Stock Specialist Paul Foster of theflyonthewall.com.

I know this is old news, but it came out during the holidays so I thought it's worth a mention in case others, like me, have missed it before. It is also -- I think -- good news for eBay Inc.'s (NASDAQ:EBAY) operations in China. Well, it seems that Alibaba.com, China's largest e-commerce company and eBay's main rival there, will soon also start charging certain fees. (Apparently, giving away services for free isn't a good revenue source).

Specifically, starting February 2007, Alibaba.com (owned 40% by Yahoo! Inc. (NASDAQ:YHOO) will charge users of its (now) free Alipay online payments service. It will only charge, however, those users who don't do business on Alibaba's auction site, Taobao. The fee Alipay will begin to charge was not disclosed but sources say it will be 1.5% of the total value of each purchase. While Alipay and Taobao contribute less than 20% to Alibaba's revenue, Jack Ma, Alibaba's founder and chairman, hopes this figure would be 30% by 2010.

eBay's online payment system, PayPal, started operating in China last year and it was rumored, especially after eBay's recently announced joint venture with Tom Online Inc. (NASDAQ:TOMO), that PayPal would work on a similar venture. Whitman, eBay's CEO, dismissed the rumor.

Why do I think Alibaba charging fees is good for eBay? Well, right now eBay's main problem in China is fees. eBay competes against free services while it charges its users fees. As more companies come to the realization that they need to charge fees, eBay's position in this potentially growth market could only improve. Of course, this step by Alibaba is small and a far cry from charging full scale fees, or from Taobao charging fees, but it might indicate the beginning of a trend.

I think we started talking about eBay, Inc.'s (NASDAQ:EBAY) endeavors in China months ago. Rumors kept surfacing every few months about eBay either getting out of China or making a deal with a local player. Just last week there were reports that Tom.com (NASDAQ:TOMO) and eBay EachNet were close to signing an agreement.

To hear, then, that eBay EachNet and Baidu, Inc. (NASDAQ:BIDU) agreed on a partnership isn't surprising and what's more, it makes perfect sense.

With over 60% of the Chinese market, Baidu is China's largest portal and search engine. With this in mind, the cross-promotional partnership could greatly benefit EachNet. Baidu will promote, PayPal Beibao, PayPal's Chinese service, as a preferred payment method while eBay EachNet will use Baidu exclusively for its search advertising. The companies will be testing the search as early as the first quarter; implementing by the second. A special toolbar, co-branded, will also be developed by the two companies.

Despite the fact that on the face of it the deal seems like it would benefit EachNet more than it would Baidu, BIDU shares are up 2.8% while EBAY shares are flat (by 11:30 a.m.). All in all, I'd say this is a positive move for eBay as the company's starting to show a strategy for this market.

Finally, if you recall, rumors of Google, Inc. (NASDAQ:GOOG) or Yahoo!, Inc. (NASDAQ:YHOO) acquiring Baidu have also been floating around. If there is any truth to these rumors, this would be weird as Yahoo! holds a stake in eBay's competitor in China, Alibaba's Taobao.

Yesterday, I waited until I had confirmation of the rumors that eBay China's CEO, Martin Wu, was indeed resigning.

Not a day later, and new reports are starting to surface about eBay China. This one claims that Tom.com, a Hong-Kong company, will soon "announce its takeover of eBay's China division and its PayPal service." That's according to a Chinese newspaper, the 21st Century Business Herald. The Tom Group is already distributing Skype in China.

eBay has been facing fierce competition in China from Alibaba's Taobao. With Taobao offering free listings while eBay Eachnet charges a fee, eBay China was losing market share fast. Now, with new Chinese regulation limiting foreign investment in online payment systems, it seems that eBay is quickly trying to improve its position in China.

A commenter in last night's post about China, claims to be close to the situation. He reassured me that my concern with the new CEO of eBay China is unwarranted since he was put there simply to facilitate and "manage the integration/transition of eBay China to its new ownership, which will either be Tencent or Tom.com." If that's true, a numbers guy for the job does make more sense.

Does this mean a withdrawal of eBay from China altogether? I find it hard to believe. As Meg Whitman, eBay's CEO, said before, the Chinese market is the one with the most growth potential. Why would eBay withdraw from that market?

Rumors are rumors and should be taken with a grain of salt. Perhaps the negotiations aren't for a takeover but more for a partnership -- one that would be similar to the Yahoo! Inc. (NASDAQ: YHOO), Alibaba relationship. That would make more sense and would definitely help eBay get a better hold of the immense Chinese market.

Last I checked, eBay shares were up more than 4%, trading at $27.30. It does seem then that there is some truth to the rumors after all. The question is, what truth.

The International Federation of Phonographic Industries (IFPI) announced today that it "is taking the preliminary steps required by Chinese law for filing a lawsuit" against Yahoo China.

The IFPI, which is a federation of the world's biggest music companies, has targeted Yahoo China (a partnership between Yahoo Inc which owns 40% and Alibaba.com) and Baidu not for hosting unlicensed music files or making them available for download, but for for providing links to web sites that do, thus directing users to easy downloads.

While the question of of how far a search engine responsibility goes in providing search results, Yahoo China isn't just offering links to sites that provide the unlicensed downloads, it also has an MP3 tab on its main page where even a non-Chinese speaker can find her desired music.

The other problem for Yahoo China might be that a Beijing judge has already ordered Baidu last year to stop directing users to music download sites.

The IFPI estimates that about 85 percent of all music consumed in China is pirated, which calls to attention the cultural and legal differences between China and other countries when it comes to copyright laws and infringements.

Yesterday I voiced some concerns regarding the overall growth of eBay.  Apparently, I am not the only one.  Analysts across the board have mixed sentiments on eBay in general and its growth potential in particular.  UBS initiated coverage with a "Neutral" rating and a $35 12-month price target, while RBC maintained its "sector perform" rating and a $42 price target.  All analysts are concerned with core markets growth but agree the company has long-term potential.