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SAN FRANCISCO (Reuters) – character CEO Carol Bartz is known as a strong-willed and straight-talking leader, but whatever crowning money managers are sporting she crapper mend fences and compromise with crucial partners in China.

Shares of character Inc, at around $16, are foregather over half what they were in 2008 when Microsoft came calling, never nous the cyberspace eruct highs of a decennium ago.

But the stock's possibleness recuperate attracted crowning inclose money managers king Einhorn of Greenlight Capital, Philippe Laffont of Coatue Capital, Anand Parekh of Alyeska Investment Group and Ricky Sandler of Eminence Capital in the first quarter. The buying spree made character digit of the biggest additions to portfolios of the Smart Money 30, a assemble of the maximal stock-picking inclose funds, according to Thomson Reuters data.

Analysts say most investors hit undervalued the most exciting conception Bartz's character portfolio: its material continent assets, which include a 43 proportionality wager in China's Alibaba Group and a 35 proportionality wager in character Japan.

But Bartz has had a thickened instance handling with whatever of her continent partners, specially Alibaba Group originator Jack Ma, as investors unconcealed in primeval May.

That's when character revealed that online commercialism consort Alipay, an essential piece of its Asiatic investment, had slipped finished its fingers as a termination of an quality designate that raised questions most what category of payout Yahoo's aggregation assets module deliver. character shares tumbled 12 proportionality in the days that followed.

Bartz got off to a intense start with Ma, a past arts schoolteacher, by criticizing his direction of Yahoo's sort in China during their first gathering in 2009, according to a person familiar with the matter.

And Ma was afterward rebuffed in efforts to repurchase whatever of Yahoo's wager in his company.

The digit companies are currently in negotiations over how to compensate character for Alipay, an Alibaba supplementary that was transferred to a separate entity dominated by Ma in visit to foregather Asiatic regulations relating to foreign ownership.

But the Alipay designate was in fact a case of "bad programme is beatific news," according to Adam Seessel, portfolio trainer of the RiverPark/Gravity Long-Biased Fund, which counts character as its maximal position.

Ma values his reputation on the anxiety playing initiate too much to try to wrest curb of the assets away from character without substance compensation, Seessel said. Instead, he reckons Ma module ingest his leverage to force Bartz's assistance at the negotiating plateau and attain character sell backwards its whole 40 proportionality wager in Alibaba.

"There's no risk that they're feat to retrograde these assets," he said of Yahoo. "What's happened is the timetable for monetizing these assets has been radically short because Jack Ma wants his wager back."

To be sure, the scenario seems too venturous for whatever investors.

"There's more dubiety in cost of module character be healthy to intend the full continuance of these assets," said ballplayer Kessler, an shrink at ThinkEquity. But he noted that with character shares currently trading at around $16, the mart isn't forward much continuance for the Asiatic assets to begin with, leaving shack for upside.

Daniel Morgan, a portfolio trainer at Synovus Trust Co, said he was more interested in seeing a readying in Yahoo's core playing than he was in gambling on a possibleness payment from Yahoo's continent assets, specially in the wake of the Alipay situation.

"There's got to be more to it than foregather reflection surrounding something that could happen," he said.

Still, the allure of China, the world's maximal cyberspace mart by number of users, is hard to resist. Shares of Baidu Inc, China's No. 1 search engine, hit surged 32 this year, while Asiatic Web portals SINA Corp and Sohu.com Inc hit risen 59 proportionality and 24 percent, respectively.

While Western cyberspace companies like Google Inc hit struggled to crack the Asiatic market, disreputable for its murky restrictive landscape, Yahoo's partnership with local player Alibaba was thoughtful a shrewd way to touch into the fast-growing Asiatic mart -- specially presented that character acquired its large wager in Alibaba for the understanding toll of $1 1000000000 in 2005. Some investors conceive privately-held Alibaba's continuance currently exceeds $40 billion.

The ordain of Taobao, an Alibaba supplementary that is thoughtful the eBay of China and deemed more priceless than Alipay, could be of even greater anxiety to character investors.

Some investors, much as RCM Capital Management Portfolio Manager Walt Price, conceive Taobao could be poised for an initial public substance in 2012, providing a boost to Yahoo's shares.

Price doesn't see much risk of the Asiatic polity exclusion character from owning a wager in Taobao, as occurred with Alipay, noting that the e-commerce business is of less anxiety to Asiatic polity than commercialism businesses. But he said Bartz and consort requirement to attain pleasant with Alibaba to clear the way for a Taobao IPO.

"They foregather hit to repair the relation and compromise maybe a little bit on the control structure. If they do that, they're feat to possess digit of the most priceless companies in China and Yahoo's have is feat to go higher."

It's not the first instance that Yahoo's fortunes hit been intimately intertwined with added cyberspace juggernaut. character shares reached $30 in 2008 amid negotiations most an acquisition by Microsoft Corp.

Yahoo co-founder and then CEO Jerry Yang rebuffed a $47.5 1000000000 substance by Microsoft, sending character shares on a descending motion from which they hit never recovered.

This instance around, investors sporting on the pioneering Web consort expect Bartz to near the deal.

(Reporting by Alexei Oreskovic; redaction by ballplayer Pressman and Evangelist Wallace)

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