Alibaba Group, a global powerhouse in the e-commerce and technology sector, witnessed a sharp decline in its shares on Monday as former Chief Executive Officer (CEO) Daniel Zhang stepped down from his leadership role in the company’s Cloud Intelligence Group (Aliyun). This unexpected development sent ripples through the financial markets, prompting concerns among investors regarding the future of the unit’s spin-off plan and speculation about potential discord among its key stakeholders.
Zhang’s departure came merely two months after he made a strategic pivot towards the cloud unit, a crucial part of Alibaba’s groundbreaking restructuring plan. Back in June, the company had made a pivotal announcement, disclosing Zhang’s decision to relinquish his position as the group CEO to channel his full attention and efforts into the burgeoning cloud business segment. Notably, Alibaba’s cloud division stands as the company’s second-largest source of revenue, trailing closely behind its domestic e-commerce operations.
A spokesperson representing Alibaba clarified that the decision regarding Zhang’s exit transpired over the weekend. Eddie Wu has been designated to step into the role of acting CEO and chairman of the cloud group. Importantly, Wu’s alignment with former Alibaba co-founder Jack Ma provides a sense of continuity and stability amidst this leadership transition. Wu’s esteemed career includes holding various crucial roles within Alibaba, such as CEO of the group, chairman of Taobao and Tmall Group, director of Local Service Group, and director of Alibaba International Digital Commerce Group.
Chelsey Tam, an analyst at Morningstar, weighed in on the situation, remarking that investors may be grappling with concerns about potential disruptions to AliCloud’s spin-off plans due to the recent change in the company’s executive structure. Despite Alibaba’s reassurance that they will proceed with their cloud unit spin-off, under the guidance of a yet-to-be-appointed management team, Alicia Yap, an analyst at Citi, underscored the possibility that Zhang’s departure might exert downward pressure on the company’s stock price until a successor is officially named.
The cloud unit, which oversees essential services such as the messaging app DingTalk and a generative artificial intelligence model known as Tongyi Qianwen, experienced a 2 percent decline in revenue during the January-March period. This decline was attributed to project delays and other contributing factors. Analysts estimate that the Cloud Intelligence Group commands an impressive 34 percent market share in China’s competitive cloud provider market, surpassing formidable rivals such as Huawei Technologies, Tencent Holdings, and Baidu.
Market analysts have estimated the value of Alibaba’s Cloud Intelligence Group to fall within the range of $41 billion to $60 billion. The company had earlier articulated its intention to complete the separation of the cloud unit by May 2024. Despite Zhang’s departure and potential setbacks, market analysts maintain a positive outlook on the group’s IPO plans for the upcoming year.
Vey-Sern Ling, managing director at Union Bancaire Privee, offered an optimistic perspective, suggesting that Wu’s assumption of Zhang’s role could potentially help Alibaba navigate its ongoing regulatory scrutiny and embark on a fresh trajectory. Amidst the uncertainties, investors are expressing concerns about the fate of the cloud unit’s spin-off plan following Zhang’s exit. Nonetheless, market analysts remain cautiously optimistic about the group’s prospects, buoyed by the appointment of Eddie Wu to the top leadership position.
The fallout from the resignation of the former CEO was reflected in the shares of Alibaba, which dipped to its lowest point since August 23. As the situation unfolds, market observers are keenly monitoring how the company navigates this transitional phase and whether its fortunes will rebound in the coming months.
Source: Reuters
