Alibaba Group, the Chinese Internet giant that is part-owned by Yahoo, is reportedly in advanced talks with investors to buy back the shares owned by Yahoo, according to a Wall Street Journal report.

Concerns of a Microsoft (MSFT) takeover have prompted Alibaba to look for possible buyers as the company prepares to maintain its independence. While Alibaba is not pushing for a Microsoft sale, the company believes it can invoke the “right of first offer” clause from its 2005 agreement with Yahoo (YHOO) to buy back Yahoo’s 39% stake. Although the Alibaba group is private, Yahoo’s stake in it should be worth upwards of $1 billion.

Alibaba’s move comes on the heels of Yahoo’s presentations with major shareholders this week. Yahoo executives are promoting some of its crown jewels, including its stake in Alibaba, to convince Wall Street that it’s worth more than Microsoft’s $31 a share bid. On Tuesday Yahoo released a rosy presentation that showed its plans to nearly double operating cash flow from $1.9 billion to $3.7 billion within three years. At $27.23, Yahoo’s stock fell by 1.5% in mid-day trading Wednesday.

UBS analyst Benjamin Schachter called Yahoo’s revenue projections for the next two years “very aggressive targets” and believes that an offer of $34 a share would be acceptable. In a note to clients he wrote, “We think the company hasn’t earned the benefit of the doubt given the operating history of the past few years.”

Meanwhile, Alibaba.com has lost nearly a fifth of its value since it listed in Hong Kong last November (that’s part of a broader market drop; the Hong Kong Hang Seng index is off some 30% from its November 2007 high). Though Alibaba.com, a business-to-business site that is part of Alibaba’s vast portfolio, reported profits that have more than quadrupled on Tuesday, the stock fell below its IPO offer price for the first time that day. Shares closed at HK $12.2o on Wednesday.