Daily Tech Snippet: Friday, June 19

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• Alibaba Finance Arm Is Valued Above $40 Billion in Latest Funding Round: Alibaba’s finance affiliate, which runs China’s biggest online payments business, closed a private placement valuing the unit at more than $40 billion, according to two people familiar with the matter. Ant Financial sold stakes to external investors, including China Development Bank Capital Company. China’s National Social Security Fund has become a strategic investor, the finance arm said on its official microblog account, without giving details of the investment. The pension fund acquired about 5 percent. Ma spun off the finance operations into a new company he controls in 2011, citing the risk of foreign ownership restrictions. Yahoo and SoftBank held a majority of Alibaba at the time. Prior to Alibaba's record $25 billion IPO in September, the companies struck a new deal that entitled the e-commerce operator to a share of earnings at Ant Financial, which is moving into new businesses, including money-market funds. Alipay, which has more than 800 million registered users, is a service similar to PayPal. Alibaba is entitled to either a third of Ant Financial shares or a one-time payout equal to 37.5 percent of the equity value, according to Alibaba’s IPO prospectus. Alibaba also holds perpetual claim to 37.5 percent of Ant Financial’s pretax earnings until it receives a third of the financial arm’s equity.


• Chinese government deals help nurse Alibaba's bottom dog cloud business: Alibaba is an underdog in the global cloud computing industry, but it has one thing going for it: it's Chinese. The firm scored a minor deal with China's northeastern port city of Dalian to build a cloud computing center and provide online government services such as bill payment.The pact is a small part of a growing portfolio of similar cloud services tie-ups between Alibaba and government bodies around China and comes against a backdrop of Beijing's deepening paranoia about foreign technology. The domestic alliances will help Alibaba's cloud unit Aliyun, literally "Ali Cloud", build scale and gain experience before any global campaign to challenge market leaders Amazon.com, Microsoft and Google. "China wants control of its information, of its data, of its news, of its technology food chain, and so there are huge opportunities." For the time being, Aliyun is small.It accounted for just 1 percent of Alibaba's overall revenue for the year ended March 31. But it says in China it has the biggest market share in cloud computing. Aliyun has forged cloud agreements with more than a dozen Chinese provinces and cities including Hainan, Guangdong, Tianjin and Shanghai. It also works with China Meteorological Administration, China Central Government Procurement Center and the state railway service center. The deals range from developing cloud storage solutions to helping the government of the southern province of Guizhou gather and crunch data to optimize its traffic lights. Aliyun in April announced a deal with state oil and gas giant Sinopec, to create a cloud system to track its petrochemical production chain and emissions. Cheng Jing, an Aliyun director who deals with government agencies, said his primary consideration was the bottom line. "First, we have to be sure that our services can make money. If these services can also promote Ali's relationship with the government then that's a good thing."


• Traders bet on Twitter near-term gains as takeover chatter persists: Dick Costolo's decision to step down as Twitter's chief executive last week failed to stem the weeks-long slide in the company's shares, but options traders appear to be betting on a near-term rebound. The stock has shed more than a third of its value since Twitter reported first-quarter results in April. It edged up 6 cents to $34.62 on Thursday, after touching a year-low of $33.51 on Tuesday. Since May, open interest in calls, usually used for bets on the shares rising, has swelled at a faster pace than the open interest in puts. For every open put contract, 1.7 calls are open, the most bullish for this ratio since early March. Traders have bid up near-dated options, with the demand for upside reflected in options skew - the difference between expectations for volatility priced into puts versus calls. Normally, puts tend to have a higher premium relative to calls, because people are willing to PAY more to protect against risk of losses. For Twitter, calls have become more expensive than puts. "The upside skew in Twitter most likely reflects the possibility of an upside event between now and July expiration," Place said."It seems that everyone and their uncle is betting that Twitter will be bought by another firm"


• A Fearless,“Fail fast, fail often” Culture Fuels America's Tech Culture, and Why Europe Trails: Here’s a stark comparison: In the United States, three of the top 10 companies by market capitalization are technology companies founded in the last half-century: Apple, Microsoft and Google. In Europe, there are none among the top 10. There are institutional and structural barriers to innovation in Europe, like smaller pools of venture capital and rigid employment laws that restrict growth.Often overlooked in the success of American start-ups is the even greater number of failures. “Fail fast, fail often” is a Silicon Valley mantra, and the freedom to innovate is inextricably linked to the freedom to fail. In Europe, failure carries a much greater stigma than it does in the United States. Bankruptcy codes are far more punitive, in contrast to the United States, where bankruptcy is simply a rite of passage for many successful entrepreneurs. There is also little or no stigma in Silicon Valley to being fired; Steve Jobs himself was forced out of Apple. Europeans are also much less receptive to the kind of truly disruptive innovation represented by a Google or a Facebook