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 will step down from the roles to focus on its cloud division as the Chinese e-commerce giant moves ahead with a plan to split into six business units.

Zhang has served in three roles simultaneously since December, when he took over as head of the cloud unit after it suffered an outage it described as its “longest large-scale failure” in over a decade.

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

Both appointments will take effect on September 10, Alibaba said.

“The appointment of Daniel to focus on driving cloud is really a testament to the confidence and trust that he takes the most valuable business and runs with it to develop it in the right way given this age of generative artificial intelligence (AI),” said Brian Wong, a former Alibaba employee and author of the book “The Tao of Alibaba.”

“The idea or expectation that one person could manage the company’s crown jewel Cloud and at the same time manage the entire Alibaba Group is an unreasonable expectation.”

The surprise reshuffle comes after two turbulent years in which Alibaba was heavily targeted by increased regulatory scrutiny and after the group announced in March that it would restructure itself into six entities, each with their own boards and chief executives.

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

Zhang, in a memo to staff seen by Reuters, said the cloud spin-off was approaching a crucial stage and the time was right for him to turn his attention to the business.

“From a corporate governance perspective, we also need a clear separation between the board and the management team as Cloud Intelligence Group continues on its path to becoming an independent public company,” 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 cloud unit to be worth $41 billion to $60 billion, but have said the amount of data it monitors could put it in the crosshairs of regulators at home and abroad.

SINGLES DAY

Zhang, a former accountant, joined Alibaba in 2007 and is known for being the architect of the company’s annual flagship “Singles Day” shopping festival. He has served as CEO since 2015 and assumed the chairmanship in 2019, succeeding both roles from Alibaba founder Jack Ma.

Alibaba thanked Zhang for his “extraordinary leadership in navigating the unprecedented uncertainty that has affected the company’s operations in recent years.”

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

“Under the new structure, the group will play a smaller role in setting strategies for the six business groups, so bringing in Alibaba founders Joe and Eddie as chairman and CEO likely serves the purpose of ensuring smooth leadership transition and maintaining culture,” Shanghai-based Independent analyst Eric Chen, who publishes at Smartkarma, told Reuters.

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

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

Cooke said he did not see the leadership changes as signaling a major strategic shift at Alibaba, given that the individuals are co-founders and close associates of Ma.

“If anything, it underscores the growing importance of AI in the company’s focus, while emphasizing that e-commerce is its core business.”

COMPETITION

Ma, China’s best-known entrepreneur, has stayed out of the public eye since late 2020 after a speech criticizing Chinese regulation widely seen as triggering a subsequent crackdown.

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

Last week, Alibaba President J. Michael Evans said Ma remained Alibaba’s largest shareholder and cared very much about the company. He said Ma taught at a university in Tokyo and also spent more time in China.

Chinese tech news agency LatePost reported on Monday that Ma convened a meeting with executives from Taobao and Tmall Group where he highlighted fierce competition and discussed the need to return focus to users, the internet and Taobao – whose sellers are mostly individuals or small businesses – to remain relevant.

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

Reporting by Abinaya Vijayaraghavan in Bengaluru and Brenda Goh in Shanghai; Additional reporting by Scott Murdoch in Sydney and Anne Marie Roantree and Josh Ye in Hong Kong; Editing by Muralikumar Anantharaman and Christopher Cushing

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