In a surprising turn of events, Alibaba's stock took a hit of over 4% in Hong Kong after the sudden departure of the ex-group CEO, Daniel Zhang. This move came merely two months after Zhang had shifted his primary focus to cloud computing, a decision that has now raised eyebrows over the future of the unit's spin-off plan and the potential for internal disagreements at the top echelons of the company.
Eddie Wu, the new group CEO, will now also assume the role of acting CEO and chairman of the cloud unit, which has been grappling with sluggish sales growth. This comes ahead of an anticipated initial public offering (IPO) for the unit next year. Analysts have expressed mixed feelings about this development. Chelsey Tam, an analyst at Morningstar, voiced concerns about possible disagreements among Alibaba's partners, suggesting that this recent change might not have been part of the initial plan laid out in June.
Back in June, Alibaba had announced that Zhang would step down from his group CEO role to concentrate solely on the cloud unit, which stands as the company's second-largest revenue generator. The Cloud Intelligence Group, which was valued between $41 billion to $60 billion earlier this year, is one of five units that Alibaba is planning to spin off in what is being termed as the most significant restructuring in its 24-year history.
Despite the concerns, Alibaba has reiterated its commitment to the spin-off plan for the cloud unit, which is expected to be completed by May 2024. However, the sudden departure of Zhang has left investors anxious, with some fearing that the timeline and process for the cloud unit's spin-off might be impacted.
The cloud unit, while being a significant revenue source for Alibaba, has faced challenges. Its revenue saw a decline for the first time in the January-March quarter, dropping by 2% due to delayed projects and other factors. However, it still holds the title of China's largest cloud provider, boasting a 34% market share, outpacing competitors like Huawei Technologies, Tencent Holdings, and Baidu.
Zhang's leadership at Alibaba has been marked by significant milestones, but also challenges. He took over the reins of the cloud unit in December after it experienced its most extended major-scale failure in over a decade. When announcing his decision to focus solely on the cloud unit in June, Zhang had emphasized the need for a clear distinction between the board and management as the unit geared up for a spin-off.
The recent changes at Alibaba, especially with Wu, one of the 18 original co-founders, taking over, might signify a fresh start for the company. After facing nearly two years of intense regulatory scrutiny, this could be the reset Alibaba needs to steer its future course.
