The shares of the Chinese Alibaba Group, listed in Hong Kong, fell more than 4% on Monday after the surprise departure of Alibaba’s CEO, Daniel Zhang, from the company’s cloud computing business.
The company announced Zhang’s decision to leave the unit in an internal letter to employees seen by Reuters. Zhang was scheduled to hand over the CEO role of the group to Eddie Wu on Sunday. The letter stated that Wu would also take charge of the cloud business after Zhang’s departure.
The cloud unit is China’s largest cloud provider and is expected to be spun off from Alibaba as part of the group’s restructuring.
The company mentioned that Zhang would continue to contribute to Alibaba by “channeling his expertise differently,” adding that it would invest $1 billion in a technology fund that Zhang would establish. Alibaba also granted Zhang the title of “emeritus,” the first in its history.
Analysts estimated the cloud unit’s value to be between $41 billion and $60 billion but noted that the amount of data it oversees could attract the attention of national and foreign regulators.
Alibaba’s shares dropped by as much as 4.4% to HK$86.85, the lowest level since August 23.
Change in leadership at Alibaba marks a new era for Jack Ma’s tech giant
Zhang’s departure marks the end of a remarkable career during which Alibaba became China’s largest company and one of the world’s largest, venturing into new areas such as physical retail, which became one of the company’s fastest-growing businesses. A representative from Alibaba confirmed Zhang’s departure. The former CEO will now lead a $1 billion technology investment fund on behalf of Alibaba.
Tsai and Wu take on Zhang’s roles just as the Hangzhou-based company undergoes a complex restructuring that will split China’s internet leader into several independent companies in areas ranging from cloud services to logistics and online shopping.
Now, they have the responsibility of turning around a $230 billion corporation struggling to recover from Beijing’s regulatory crackdown on the internet sector in 2021.
Both executives are considered heavyweights in the business world, credited with steering the technology and strategy that sustained China’s then-most valuable corporation, co-founded by Ma in 1999 at the dawn of China’s internet industry.
However, around 2020, Alibaba found itself at the center of President Xi Jinping’s tech crackdown on the country’s most powerful private companies, hampering growth in various parts of the industry and undoing once-aggressive expansion plans.
In addition to regulatory uncertainty, Alibaba, a kind of proxy for Chinese consumption, has faced geopolitical challenges and a weakened domestic economy. It also faces strong competition from other e-commerce platforms like PDD Holdings, as well as short video platforms.
The new leadership’s task is to figure out how to follow through on a groundbreaking restructuring aimed at strengthening Alibaba’s separate businesses. With the restructuring, Alibaba stated that it wants to operate as a true investment company, where individual units can seek funding and go public separately.
Tsai, a Yale alum known for his negotiating skills and respected by investors, will likely play a significant role in dealing with markets and Alibaba’s key supporters.
A former lacrosse athlete, he is perhaps better known in the United States as the owner of the Brooklyn Nets, a popular NBA franchise in New York, and has a deep understanding of business, as he was alongside Ma at the start of Alibaba in a lakeside apartment in Hangzhou.
Wu, who also joined Ma from the beginning, is a less well-known figure. The computer science alum is credited with helping develop the company’s advertising platform and Alipay, similar to PayPal, which is now part of Ma-backed Ant Group.
He then established a venture capital firm managing around 10 billion yuan (US$1.4 billion) in a portfolio covering autonomous driving and software. With Zhang’s departure, Wu will take over as interim president and CEO of the cloud division.
