As expected, Yahoo announced on Thursday it had paid $1 billion in cash to purchase a 40 percent stake in Chinese e-commerce site Alibaba.com, which runs auctions where foreign companies and individuals sell their products at wholesale. Yahoo's Chinese search, mail and messaging services will now fold into Alibaba.

Alibaba CEO Jack Ma will head the merged entity, which is valued at around $4 billion. Yahoo will retain 35 percent voting rights in the new company, and founder Jerry Yang will serve on Alibaba's board. Analysts see the deal as a win for both companies; Alibaba gets the support and credibility of the Yahoo brand, while Yahoo obtains a strong presence in the exploding Chinese market.