International

Alibaba Cloud’s Future Uncertain After CEO Resignation

Published

1 year ago

Sep 11, 2023.

Eko Hot Blog reports that Alibaba Group’s cloud computing business suffered a blow on Monday after former CEO Daniel Zhang stepped down, sending the company’s shares down more than 4%.

Zhang, who had been concurrently heading the group as well as the cloud intelligence unit, had announced in June that he would leave his group roles to wholly focus on the cloud business.

However, in an internal letter to staff seen by Reuters, Zhang said he had decided to leave the unit to “pursue other interests”.

Co-founder Eddie Wu has been appointed acting CEO and chairman of Alibaba Cloud.

Zhang’s departure comes as Alibaba Cloud faces growing competition from state-owned telecom companies and Huawei Technologies, as well as a tighter regulatory environment.

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

Alibaba’s stock fell as much as 4.4% to HK$86.85, its lowest since August 23.

Analysts Weigh In

Li Chengdong, head of e-commerce focused, Beijing-based Haitun think tank, said Zhang’s departure looked like a personal decision and came as Alibaba Cloud faces growing competition.

“Alibaba Cloud has lost some ground with government and state-owned enterprise clients, which were previously a stronghold for the company,” Li said.

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

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

Vey-Sern Ling, 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”.

“This is a good opportunity for Alibaba to reset and restructure its cloud business,” Ling said. “The new management team will have a clean slate and can focus on building a world-class cloud business.”

What Does This Mean for Alibaba?

The departure of Zhang is a major blow to Alibaba, and it remains to be seen how the company will fare without him.

However, the appointment of Wu as acting CEO is a positive sign, and analysts believe that he has the experience and expertise to lead Alibaba Cloud through this challenging period.

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