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Alibaba shares slide 4% after former CEO quits cloud unit in surprise move

HONG KONG – The Hong Kong-listed shares of China’s Alibaba Group fell more than 4 per cent on Monday after the surprise departure of former chief executive Daniel Zhang from the technology giant’s cloud computing business.

Alibaba announced Mr Zhang’s decision to leave the unit in an internal letter to staff seen by Reuters, with co-founder Eddie Wu becoming the unit’s acting CEO and chairman. Mr Zhang also handed over the role of group CEO to Mr Wu on Sunday as scheduled.

Mr Wu is also the chairman of Alibaba’s core Taobao and Tmall online commerce divisions.

The unit is China’s largest cloud provider with a 34 per cent share of the market, research consultancy Canalys said in June. It also houses Damo Academy, Alibaba’s research arm for chips and artificial intelligence, and is set to be spun off from Alibaba by May 2024 as part of the group’s restructuring.

Mr Zhang previously headed both the group and the cloud intelligence unit, and the firm in June announced he would leave his group roles to wholly focus on the cloud business.

Mr Li Chengdong, head of e-commerce focused, Beijing-based Haitun think-tank, said Mr Zhang’s departure looked like a personal decision and came as Alibaba Cloud faces growing competition from state-owned telecom companies and Huawei Technologies, as well as a tighter regulatory environment. “Alibaba Cloud has lost some ground with government and state-owned enterprise clients, which were previously a stronghold for the company,” he said.

“During his leadership tenure, Alibaba Cloud’s business did not improve significantly despite his efforts. Zhang likely realised that the challenges facing Alibaba Cloud’s lacklustre growth were beyond what he could influence or control as an individual executive.”

Mr Li said he did not see Mr Zhang’s departure as having much impact on Alibaba Cloud’s listing plans, as that would ultimately depend on the unit’s business performance.

Alibaba said it would continue to execute the spin-off plan under a separate, to-be-appointed management team.

Mr Ling Vey-Sern, managing director at Union Bancaire Privee, said he viewed the development as positive as it would allow Alibaba and the cloud business to start from a “clean slate”. Regarding the share price, he noted that macro and geopolitical concerns over China were also a factor.

Alibaba’s stock closed 3.03 per cent lower at HK$88.05 on Monday.

Alibaba said in its letter that Mr Zhang will continue to contribute to Alibaba by “channelling his expertise differently” and that it will invest US$1 billion (S$1.36 billion) in a technology fund that Mr Zhang would establish. Alibaba also gave Mr Zhang an “emeritus” title, a first in its history.

Analysts have estimated the cloud unit to be worth US$41 billion to US$60 billion but have said the reams of data it oversees could put it in the crosshairs of regulators at home and abroad.

The cloud business is a major part of a restructuring the Chinese e-commerce giant announced in March that breaks the company up into six units, each with its own boards and CEOs.

Mr Zhang took over as head of Alibaba’s cloud unit in December after it suffered an outage that it described as its “longest major-scale failure” for over a decade.

A former accountant, Mr Zhang joined Alibaba in 2007 and is known for being the architect behind the company’s annual flagship Singles’ Day shopping festival. He was appointed CEO in 2015 and took on the chairmanship in 2019, succeeding Alibaba co-founder Jack Ma in both roles.

His final years as head of the group saw him manage the tech giant through a tumultuous two years that saw Alibaba heavily targeted by increased regulatory scrutiny. REUTERS

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