In a surprising twist, Alibaba Group Holding Ltd is prepared to entirely unwind a ground-breaking cloud business worth $12 billion, leading to conjectures about possible market or political influences. CEO Daniel Zhang made the startling revelation on Thursday, outlining Alibaba’s historic six-way restructuring, including plans to fully relinquish control over Alibaba Cloud.
This division, once a thriving operation with a potential to invigorate the company similarly to how Amazon Web Services bolstered Amazon.com Inc., is valued by some analysts at over $30 billion. However, this move also means relinquishing a unit that carries inherent risks and market uncertainties. Alibaba’s stock saw a dip of as much as 5.9% in Hong Kong Friday, after reporting lackluster Chinese trade figures.
Over a decade, Alibaba has poured billions into providing cloud computing services for businesses globally, marking one of its most boasted successes. However, regulatory scrutiny intensified around 2020, following Beijing’s concerns over the control of sensitive data by private companies. The cloud division began losing market share to rivals such as Huawei Technologies Co. and state-run China Mobile Ltd., triggering a now-infamous crackdown.
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Alibaba’s separation plan involves spinning off its cloud services division into a standalone entity by issuing stock to shareholders over the next year. The firm also aims to go public with its Freshippo grocery chain within the coming year and receive external funding for its international business division.
With the cloud arm running essentially as an independent entity, it’s interconnected with some of the company’s most critical initiatives, similar to Amazon’s cloud service that arose from the computational power needed to manage millions of simultaneous online shopping transactions. Despite facing homegrown challenges, Alibaba’s cloud services, with their home-field advantage in the enormous Chinese market, were once viewed as a safeguard for its core operations.
News Source: Business Outreach
