Daniel Zhang’s departure from Alibaba signifies a turning point for the company, which faced rigorous regulatory scrutiny during his leadership.
Alibaba’s stock fell over 4% in the Hong Kong market on Monday, shortly after Daniel Zhang, the former CEO of the Alibaba Group, resigned from his position. He had refocused on cloud computing just two months earlier, raising concerns about the company’s plans to spin off its cloud computing unit and the potential for leadership disagreements.
In response to these changes, Eddie Wu, the newly appointed group CEO, will take on the roles of acting CEO and chairman for the unit. This unit has been struggling with slow sales growth as it prepares for an initial public offering (IPO) scheduled for the next year.
“We have conflicting opinions about this news,” stated Morningstar analyst Chelsey Tam in a client note. “We believe that Alibaba’s recent change was not part of the plan they laid out in June, and we have concerns about potential disagreements among Alibaba’s partners.”
In June, Alibaba (9988.HK) had announced that Zhang would step down from his role as group CEO to focus on the cloud unit, which represents the company’s second most profitable segment.
The Cloud Intelligence Group, previously valued between $41 billion and $60 billion earlier this year, is one of the five units that Alibaba is spinning off as part of its most extensive restructuring effort in its 24-year history.
The Cornerstone of Revenue Generation
Alibaba announced Zhang’s departure from the cloud unit, reported by Reuters, without disclosing reasons but mentioning his plans for a tech fund. On the same day, Zhang passed the group CEO role to Wu and the chairmanship to Joseph Tsai as planned.
The cloud unit, second only to domestic e-commerce in revenue, includes DingTalk and Tongyi Qianwen. Last month, DingTalk’s separation as a separate entity was revealed.
In Q1, the cloud unit’s revenue dropped 2% due to delays and other factors, its first-ever decline. Still, it’s estimated to be China’s top cloud provider with a 34% market share, ahead of Huawei Technologies, Tencent Holdings, and Baidu.
Zhang, who became group CEO in 2015 and chairman in 2019, took over the cloud unit in December after a major outage.
In June, Alibaba initially announced Zhang’s full commitment to the cloud unit, citing the need for clear board and management separation as it pursued a spin-off.
Morningstar’s Tam raised concerns about Wu’s appointment as acting cloud CEO, impacting governance and customer data-sharing with Alibaba.
Alibaba’s New CEO
According to analysts, Wu taking the helm and Zhang’s departure could be a pivotal moment for Alibaba, which underwent two years of intense regulatory scrutiny during Zhang’s leadership.
Vey-Sern Ling, managing director at Union Bancaire Privee, sees Zhang’s exit as a fresh start for the cloud business.
Wu, one of Alibaba’s 18 co-founders, has held key roles since joining in 1999, including group CEO, chairman of Taobao and Tmall Group, director of Local Service Group, and director of Alibaba International Digital Commerce Group.
Ling added, “Eddie Wu, an original founder closely aligned with Jack Ma, is expected to reinvigorate the business.”
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