Alibaba to split into six units

Alibaba to split into six units

CEO of $B220-billion empire says each new firm could eventually pursue an IPO

(Photo: Reuters)
(Photo: Reuters)

Alibaba Group Holding Ltd has announced plans to split its $220-billion business into six main units encompassing e-commerce, media and the cloud, each of which will explore fundraising or an initial public offering (IPO) when the time is right.

Group chief executive officer Daniel Zhang will head up the cloud intelligence division, reflecting the growing role that AI will play in the e-commerce leader’s portfolio in the long run.

Former international retail chief Jiang Fan will head up the digital business unit, while longtime executive Trudy Dai will oversee the main Taobao Tmall online shopping division. Its other divisions include local services such as meal delivery, the Cainiao logistics group and digital media and entertainment.

“Each business group and company can pursue independent fundraising and IPOs when they are ready,” Zhang said in a statement.

US-listed shares of Alibaba rose 3.5% in trading before the opening bell in New York on Tuesday.

The shift to a holding company structure is rare for major Chinese tech companies. It marks a departure from the internet company’s traditional preference for keeping most of its operations under one roof, running everything from supermarkets to data centres under the main Alibaba umbrella.

The decision also sends a strong signal that Alibaba is ready to tap investors and public markets, after the Xi Jinping administration’s clampdown on internet giants wiped out some $500 billion of the company’s value.

“The news follows Beijing’s vow to support the private sector. If China wants to achieve its 5% GDP growth target, they need to support companies like Alibaba,” said Steven Leung, executive director of the securities firm UOB Kay Hian. 

Despite the creation of a half-dozen business lines, Alibaba on Tuesday reaffirmed the cost-cutting it had pledged to pursue to shore up the bottom line. That was a conservative shift for a tech conglomerate that once spent aggressively to dominate many parts of the economy, reflecting the dissipation of growth since Beijing’s crackdown began in 2020.

The crackdown has fundamental changes in the business models of companies including Alibaba. The e-commerce pioneer is also navigating increasingly tough competition from arch-rival as well as up-and-comers such as PDD Holdings and ByteDance. 

“At 24 years of age, Alibaba is welcoming a new opportunity for growth,” Zhang said. “The market is the best litmus test, and each business group and company can pursue independent fundraising and IPOs when they are ready.”

Founded in 1999 by entrepreneur Jack Ma and a group of friends, Alibaba last year reported a net profit of 46.8 billion yuan (US$6.8 billion), up 69% from the previous year, on revenue of 247.7 billion yuan ($35.9 billion).

Mr Ma retired as chairman of the company in 2019, but his comments and activities continue to be closely watched. When he criticised Chinese regulators in 2020 for impeding innovation, they abruptly cancelled the IPO of the company’s Ant Group fintech business, the first move in a broader crackdown on the country’s powerful technology sector.

This week he was spotted in Hangzhou, where Alibaba was founded, in what is believed to have been his first appearance in mainland China in three years.

Do you like the content of this article?