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September 11, 2023updated 12 Sep 2023 10:35am

Alibaba Cloud CEO quits as company works towards six-way separation

The Chinese tech giant is planning a spin-off of the cloud division as part of a wider move to split the company into six parts.

By Ryan Morrison

Alibaba Cloud’s CEO has quit just two months after taking the role full-time, raising questions over the company’s planned split. Former group CEO Daniel Zhang moved over to focus solely on the cloud division in July, relinquishing other jobs to new group chief executive Eddie Wu. His departure led to a 4% drop in the Alibaba Group stock price when it was announced this morning.

Alibaba Cloud has struggled with reduced revenue this year ahead of a planned spinoff IPO in 2024 (Photo: Karolis Kavolelis / Shutterstock)
Alibaba Cloud has struggled with reduced revenue this year ahead of a planned spinoff IPO in 2024 (Photo by Karolis Kavolelis/Shutterstock)

Earlier this year Alibaba announced a massive reorganisation that would see its business split into six separate companies. The decision came as China began a crackdown on the scale of its largest tech companies with tighter controls from regulators. 

No specific reasons have been given for Zhang’s departure; however, he says his plan is to launch a new technology fund. He originally succeeded Alibaba co-founder Jack Ma as group CEO in 2015 and became group chairman in 2019. The outgoing CEO also took on responsibility for the cloud division in December last year following a major outage.

After a rocky start for the cloud division in 2023 that saw its first-ever drop in revenue, and the announcement of the planned spinoff, Zhang took the decision to take complete control of the cloud division, handing the rest of his group CEO responsibilities to Wu. 

The Cloud Intelligence Group includes all Alibaba’s cloud and AI services and is the second-biggest revenue source for the group after its domestic e-commerce unit. Zhang wanted to ensure there was a complete separation between the board and management during the unit spinoff, leading to him also relinquishing his group chairman role to Wu.

Alibaba says the split will continue as planned with Wu taking on the cloud unit in addition to his wider group responsibilities. Elsewhere, the Alibaba split will create the Taobao Tmall business group, focusing on e-commerce, the local services group, the global digital business group that incorporates the company’s international e-commerce brands, Cainiao Smart Logistics, and a digital media and entertainment group.

Alibaba will maintain control of Taobao but any of the new companies will be free to seek outside investment or go for an IPO. “The original intention and fundamental purpose of this reform is to make our organisation more agile, shorten decision-making links and respond faster,” Zhang said at the time of the original announcement.

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Alibaba’s struggle for growth: IPO ahead?

The cloud unit has struggled with weak sales growth ahead of a potential IPO next year and this is something Wu will have to get to grips with as part of the transition. Currently valued at between $41bn and $60bn, the spinoff process is expected to complete next May.

The Aliyun cloud division operates in 15 regions outside China and is one of the largest providers in the world by market share. However, it trails behind the US hyperscalers Amazon’s AWS, Microsoft Azure and Google Cloud. It has also had to fight against distrust from the west, particularly the US, in Chinese companies, which has led to slower growth outside of Asia.

Wu was one of the 18 co-founders of Alibaba, starting in 1999 as technology director. As well as group CEO he is also chairman of Taobao and Tmall group, a director of the Local Services Group, director of Alibaba International Digital Commerce Group and now CEO and chairman of the Cloud Intelligence Group.

Analysts have warned that Wu’s taking on the leadership of the cloud division could cause regulatory problems like those Zhang had attempted to avoid. But, speaking to Reuters, Vey-Sern Ling, managing director at Union Bancaire Privee said it would also give the cloud division a “clean slate”, adding that Wu is close to Jack Ma and could bring “fresh energy to the business”.

Read more: Alibaba split: Break-up of Chinese tech giant creates new cloud unit

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