Alibaba IPO Blockbuster: 10 Takeaways

Alibaba's IPO Bonanza

Friday's initial public offering of Alibaba Group Holding is expected to blow the covers off the IPO record books, raking in a whopping $24 billion in capital for the Chinese Internet juggernaut. Can Alibaba change the IT game once it's flush with cash? Will it grow its North American beachhead? Should Amazon be quaking in its boots?

Here is a look at Alibaba and what you need to know.

Alibaba By The Numbers

Alibaba, founded in 1999 to help connect Chinese manufacturers with overseas buyers, today has a revenues of $7.5 billion against $248 billion in sales, according to its initial public offering paperwork filed earlier this year. Alibaba's empire consists of online shopping, B2B sales, online payments, shipping, wholesale trade and cloud computing.

The company is based in Hangzhou, China and is already believed to be the world’s largest internet-based retailer. The company has approximately 22,000 employees and last year reported it had 11.3 billion orders from more than 220 countries. Last year 80 percent of all Chinese e-commerce transactions went through Alibaba, according to the company's website.

Both Softbank Corp and Yahoo have stakes in Alibaba (34.1 and 22.4 percent respectively).

Business Units

Alibaba Group has 12 major businesses and affiliated entities that includes (B2B ecommerce site), (B2C ecommerce site), Tmall (ecommerce sales platform), Alipay (PayPal-like payment platform), (online classified service), Aliyun (mobile OS), (product search engine), (domain registrar), (consumer ecommerce platform), CNZZ (web analytics tool) and OneTouch (business process outsourcing).

Anything Under The IT Sun -- And More

Channel partners know because of its reputation for having those hard-to-find or "unavailable" IT components. Joe Lore, sales director at Woburn, Mass.-based white box system builder Sunnytech, said he's turned to Alibaba in a jam when a laptop part is either unavailable or extremely expensive from his regular distributor. "When my supplier tells me it will cost $1,400 for a part and Alibaba says I can get the same part for $500 direct from China I suck up the three-week delivery delay and give Alibaba my business," Lore said.

Should Traditional Distributors And DMRs Be Worried?

Given that it takes weeks, not days, for shipments to be delivered from China to the U.S., North American distributors and direct market resellers really don't have anything to worry about today. But, Scott Strawn, research director at IDC said Alibaba could take a number of steps to make it more relevant to U.S. buyers. He said it's not out of the question Alibaba could have plans to develop a bigger North American beachhead by creating more efficient supply chain and delivery options for U.S. Alibaba buyers.

Biggest IPO Ever?

With an IPO that's expected to draw $24.3 billion, Alibaba could set a record for the world's biggest IPO. That would surpass Agricultural Bank of China's $22.1 billion listing in 2010. Visa, in 2008, had an IPO offering that brought in $19.65 billion and Facebook, in 2012, netted $16 billion in IPO capital.

The company plans to sell shares between $60 and $66 per share, valuing the company at around $163 billion based on opening day expectations. At that valuation, Alibaba beats out Amazon's market capitalization of $149.4 billion.

When buying Alibaba shares, investors will not be buying share ownership of the Chinese company. Because China forbids foreign investment in Chinese-owned companies, investors will be buying a Cayman Islands-registered company that will profit from Alibaba's Chinese assets. The company was approved to be listed on the NYSE exchange with the ticker symbol BABA.

Chasing After Trillions Of IT Dollars

There are nearly $3 trillion in IT dollars spent annually with the bulk of that spending moving rapidly online. Alibaba is a major player in that shift. What Alibaba is doing, right alongside its competitors, is trying to figure out how to capitalize on that shift.

Strawn said that with only 40 percent of the world's population online, Alibaba is racing with global Internet goliaths Amazon and Google in attempt to own new markets. "It's so key to be first. Each dollar spent by an Alibaba or Google to be first to market really does translate into potential new revenue streams."

Alibaba: Chasing The Next Big Thing

What will Alibaba spend with its new capital on? One of the reasons Alibaba chose to list its shares in the U.S. is because of its desire to infiltrate the U.S. investor base and market.

The upside for Alibaba is tremendous, said Strawn. Flush with a potential $24 billion in capital, analysts say, the Chinese Internet juggernaut could move in a number of different directions. "Alibaba has not shown its IPO hand revealing what it plans to do," he said.

Possibilities run the gamut.

’Alibaba continue to innovate in many areas of their business to keep existing customers happy and attract new customers,’ wrote Professor Qing Wang, Warwick Business School Professor, in a research note. ’This ability to understand customers intimately and continuously innovate should enable them to expand overseas with U.S. dominance in the world technology sector gradually being broken.’

Should Google, Amazon Be Worried?

Alibaba competes with Amazon and Google as all three seek to own as much of the user's activity as possible. In that sense Alibaba uses its social and e-commerce platform to do just that.

Where Alibaba and Amazon differ is the fact Alibaba facilitates e-commerce without ever managing inventory. It acts more like Ebay, introducing buyers and sellers. That has its plusses and minuses, for example, Alibaba has had to combat the sale of counterfeit IT goods on its network where Amazon and other ecommerce companies have tighter control over inventory and sellers on its network.

Alibaba Cloud Play?

Competing more aggressively against Amazon or Google on the cloud front by bolstering its growing cloud business is also possible. As a Chinese-owned company, however, Alibaba would face significant hurtles wooing U.S. companies to host sensitive data on its cloud, experts say.

Yahoo Wins With Alibaba IPO

Yahoo has a 22.4 percent stake in Alibaba what will be worth $36 billion if the IPO generates the expected $24 billion in capital. According to a MarketWatch analysis of the impact of Alibaba's sale, Yahoo's stake would be valued at about $45 billion. Yahoo has said it plans to sell 140 million shares of its Alibaba interest, which could net the company $12 billion before taxes.

Yahoo CEO Marissa Mayer said Yahoo will share half the proceeds with investors. What will Yahoo do with its Alibaba windfall? Analysts say it's likely Yahoo will double down on its mobile, social and video strategy with possible acquisitions that are in line with its purchase of social media sites Tumblr and Summly.