Alibaba stock slides after ex-CEO abruptly quits cloud unit ahead of IPO By Reuters

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<span>© Reuters. Alibaba Group sign is seen at the World Artificial Intelligence Conference (WAIC) in Shanghai, China July 6, 2023. REUTERS/Aly Song/Files</span><br />
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<p>By Josh Ye and Donny Kwok</p>
<p>HONG KONG (Reuters) -Alibaba’s stock lost more than 4% in Hong Kong on Monday after ex-group CEO Daniel Zhang quit just two months after concentrating his focus on cloud computing, raising concern over the unit’s spin-off plan and possibility of discord at the top.</p>
<p>New group CEO Eddie Wu will concurrently become acting CEO and chairman of a unit grappling with weak sales growth ahead of an initial public offering (IPO) penned for next year.</p>
<p>“We have mixed thoughts on this news,” said Morningstar analyst Chelsey Tam in a client note. “We think this latest change was not planned back in June and there are concerns of disagreements among <span itemscope="" itemtype="http://schema.org/Corporation"><span itemprop="name"> Alibaba </span></span> (NYSE:)’s partners.”</p>
<p>In June, Alibaba said Zhang would relinquish his group CEO role to focus on the cloud unit, the firm’s number two money spinner.</p>
<p>The Cloud Intelligence Group, valued at $41 billion to $60 billion earlier this year, is among five units Alibaba is spinning off as part of the biggest restructuring of its 24-year history.</p>
<p>Alibaba said it will continue with its plan to spin off the cloud unit under a yet-to-be-appointed management team. Earlier this year, it said it would complete the process by May 2024.</p>
<p>Citi analyst Alicia Yap in a note said Zhang’s departure could drag on Alibaba stock until a successor is named.</p>
<p>“Investors may be concerned that the timing and process of AliCloud’s spin-off may be affected.”</p>
<p>Alibaba did not immediately respond to a request for comment over such concern. Its share price fell as much as 4.4% to HK$86.85 ($11.08), its lowest since Aug. 23.</p>
<p>CLOUD AS KEY REVENUE SOURCE</p>
<p>Alibaba announced Zhang’s decision to exit the cloud unit in a staff letter on Sunday seen by Reuters, without disclosing reasons, and said he would set up a technology fund. The same day, Zhang handed the group CEO role to Wu and chairmanship to co-founder Joseph Tsai, as scheduled.</p>
<p>The cloud unit is Alibaba’s second-biggest revenue source after domestic e-commerce and houses DingTalk and the group’s generative artificial intelligence model Tongyi Qianwen.</p>
<p>Messaging app DingTalk is to be split off into a separate entity, two people close to Alibaba told Reuters last month.</p>
<p>The cloud unit’s revenue fell for the first time in January-March, by 2%, due to delayed projects and other factors. Still, analysts estimate it is China’s largest cloud provider with a 34% market share, ahead of Huawei Technologies, Tencent Holdings (OTC:) and Baidu (NASDAQ:).</p>
<p>Zhang, who succeeded leading co-founder Jack Ma as group CEO in 2015 and chairman in 2019, took charge of the cloud unit in December after an outage it described as its “longest major-scale failure” in over a decade.</p>
<p>In June, when Alibaba announced that Zhang would wholly focus on the cloud unit, he said he was doing so due to a need for clear separation between board and management as the unit pursued a spin-off. He said it would be “inappropriate” for him to continue in his group and unit roles. </p>
<p>Morningstar’s Tam said Wu’s appointment to acting cloud CEO could raise governance concerns and invalidate benefits that would have arisen from having different CEOs.</p>
<p>“For example, Alibaba Cloud’s potential customers may worry about the sharing of their data with Alibaba,” she said.</p>
<p>WU TAKES OVER</p>
<p>Still, Wu taking over and Zhang departing could mark a turnaround for a company subjected to about two years of intense regulatory scrutiny during Zhang’s tenure, analysts said.</p>
<p>His exit will allow the cloud business to start from a “clean slate”, said Vey-Sern Ling, managing director at Union Bancaire Privee.</p>
<p>Wu is one of 18 Alibaba co-founders, starting out in 1999 as technology director. He is now group CEO, chairman of Taobao and Tmall Group, a director of Local Service Group, and a director of Alibaba International Digital Commerce Group.</p>
<p>“Eddie Wu, being part of the original group of founders and closely aligned to Jack Ma, should bring fresh energy to the business,” Ling said. </p>
<p>($1 = 7.8378 Hong Kong dollars)</p>
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<br /><a href="https://www.investing.com/news/stock-market-news/alibaba-shares-slide-4-after-outgoing-ceo-quits-cloud-unit-3171217">Source link </a></p><p>The post <a href="https://forextraderhub.com/alibaba-stock-slides-after-ex-ceo-abruptly-quits-cloud-unit-ahead-of-ipo-by-reuters.html">Alibaba stock slides after ex-CEO abruptly quits cloud unit ahead of IPO By Reuters</a> first appeared on <a href="https://forextraderhub.com">Forex Trader Hub</a>.</p>