Alibaba CEO and Chairman Zhang steps down to focus on cloud business

SHANGHAI, June 20 (Reuters) – Alibaba Group ( 9988.HK ) said on Tuesday its CEO and Chairman Daniel Zhang would step down to focus on its cloud division. into six business units.

Zhang has been working in three roles simultaneously since December, when he took over as head of the cloud unit after a shutdown described as its “prolonged large-scale failure” for more than a decade.

The CEO role will be handed over to Eddie Yongming Wu, head of Alibaba’s Taobao and Tmall Group, while executive vice president Joseph Tsai Zhang will take over as chairman.

Both appointments will be effective Sept. 10, Alibaba said.

“Hiring Daniel to focus on Running Cloud really shows the confidence and trust he has in taking a very expensive business and fitting it into the age of artificial intelligence (AI) that runs alongside it,” he said. Brian Wong is a former Alibaba employee and author of “The Tao of Alibaba.”

“The idea or expectation that one person can manage the cloud, the crown jewel of the business, and manage the entire Alibaba Group at the same time is an unreasonable expectation.”

The surprise restructuring comes after a tumultuous two years that have seen Alibaba heavily targeted by increased regulatory scrutiny and after the group announced in March that it would be reorganized into six units, each with their own boards and CEOs.

Its China-facing e-commerce division, which includes the Taobao and Tmall marketplaces, will be wholly owned by Alibaba, but the other five units will be spun off, with Alibaba aiming to complete a public listing of its cloud unit in May. Within the next 12 months.

Zhang, in a memo to employees seen by Reuters, said the cloud spin-off was approaching a critical stage and the time was right to devote his attention to the business.

“From a corporate governance perspective, as Cloud Intelligence Group moves down the path to becoming an independent public company, there needs to be a clear separation between the board and the management team,” he said.

“It would be inappropriate for me to continue to serve as chairman and CEO of both companies simultaneously during the spin-off process.”

Analysts have estimated the value of the cloud unit at between $41 billion and $60 billion, but said the reams of data it oversees could put it in the cross hairs of regulators at home and abroad.

Singles Day

Zhang, a former accountant, joined Alibaba in 2007 and is known as the architect behind the company’s annual flagship “Singles Day” shopping festival. He has served as CEO since 2015 and took the helm in 2019, succeeding Alibaba co-founder Jack Ma in both roles.

Alibaba thanked Zhang for his “extraordinary leadership in navigating the unprecedented uncertainty that has affected the company’s business over the past few years.”

Alibaba’s Hong Kong-listed shares fell 1.5% after the announcement, in line with a 1.6% drop in the benchmark index (.HSI), as analysts see the restructuring in line with the previously announced overall restructuring.

“Under the new structure, the group will play a smaller role in setting strategies for the six business groups, so promoting Alibaba founders Joe and Eddie as chairman and CEO will help ensure a smooth leadership transition and maintain culture,” the Shanghai-based Independent reported. Eric Chen, publishing analyst at SmartKarma, told Reuters.

Wu, who co-founded Alibaba with Ma and Tsai more than two decades ago, will continue to serve as chairman of Taobao and Tmall Group, Alibaba said. His previous roles include Chief Technology Officer of Alipay and Head of Alibaba Health.

Wu’s promotion to CEO “signals a natural transition and the unchanging importance of e-commerce in the company’s roadmap,” said Jacob Cook, co-founder and CEO of Beijing-based e-commerce consultancy WPIC Marketing + Technologies.

Cook said he doesn’t see the leadership changes as signaling a major strategic shift within Alibaba, adding that the individuals are Ma’s co-founders and close associates.

“If anything, it emphasizes the importance of AI in the company’s focus, while underscoring that e-commerce is a core business unit.”

Competition

Ma, China’s top entrepreneur, has been out of the public eye since late 2020 after a speech criticizing Chinese regulation that is widely seen as precipitating a subsequent crackdown.

Ma left mainland China in late 2021 – appearing in photos in Japan, Spain, Australia and Thailand – and returned in March, a day before Alibaba announced its restructuring. He did not make any public comments during that period.

Last week, Alibaba chairman J. Michael Evans said Ma remains Alibaba’s largest shareholder and has a strong interest in the company. He said Ma teaches at a university in Tokyo and spends a lot of time in China.

On Monday, Chinese tech news agency Latepost, Ma convened a meeting with leaders of Taobao and Tmall Group, where he highlighted fierce competition and discussed the need to focus on users, the Internet and Taobao — whose merchants are mostly individuals or small businesses. Be relevant.

Alibaba did not respond to a Reuters request for comment on the LatePost report, which cited company sources.

Reporting by Abhinaya Vijayaraghavan in Bangalore and Brenda Go in Shanghai; Additional reporting by Scott Murdoch in Sydney and Anne Marie Rowntree and Josh Yeh in Hong Kong; Editing by Muralikumar Anantharaman and Christopher Cushing

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