Former Alibaba CEO Daniel Zhang steps down from cloud unit in surprise exit amid leadership transition
- Zhang’s exit comes the same day he was scheduled to hand over the company to chairman Joe Tsai and CEO Eddie Wu Yongming as decided in June
- Alibaba says cloud spin-off still on the table, group to invest US$1 billion in a technology fund to be set up by Zhang
Alibaba’s new CEO Eddie Wu Yongming, who like Tsai assumed his new role on Sunday, has also taken over for Zhang as acting chairman and CEO of Alibaba Cloud Intelligence Group on the same day, according to an Alibaba spokesperson.
“Four years ago, when [Alibaba founder] Jack [Ma] passed the chairmanship torch to Daniel, he set in motion our commitment to an institutionalised succession system that supports a sustainable enterprise for centuries,” said Tsai, who is also chairman of the South China Morning Post, in an internal letter to Alibaba employees on Sunday. “Today, Daniel has entrusted that torch to Eddie and me under the continuity of our system for leadership succession.”
Alibaba’s shares fell 3 per cent amid a declining market to HK$88.05 at the close of trading in Hong Kong on Monday, the biggest one-day drop since August 18. The stock has retraced 0.7 per cent this year, and 0.3 per cent since June 20 when the group first announced the leadership transition.
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“We think this latest change was not planned back in June, and there are concerns about disagreements among Alibaba’s partners,” said Chelsey Tam, a senior equity analyst for Morningstar, adding that it could raise concerns for corporate governance.
“The trends we are seeing now in turn prove the strategic importance of Alibaba Cloud Intelligence,” said Chen. “Its strategic position is very important [in the group], and it is facing multiple challenges including profitability and pressure to go public. It needs to draw more momentum from the development of the entire group.”
Alibaba will also “invest US$1 billion in a technology fund” established by Zhang, according to Tsai. “The fund will support Alibaba’s strategy of investing for future growth and continuing to develop our technology ecosystem,” Tsai said, adding that the Alibaba Partnership will give Zhang the distinguished title of “Aliren Emeritus”, a first for the company.
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Alibaba names co-founder Joe Tsai chairman, in surprise shake-up as Daniel Zhang steps down
Zhang, who took over as Alibaba CEO in 2015 and as chairman in 2019, “may have wanted to step back from the public spotlight”, Citigroup said in a report. Zhang could not be reached to comment.
The latest personnel change, which would mark the second leadership change at Alibaba Cloud since the end of 2022, comes as the company was already facing slower revenue growth ahead of its planned public listing.
Alibaba “will continue to execute its previously announced plan to spin off Alibaba Cloud Intelligence Group under a separate management team to be appointed”, the spokesperson said.
“Alibaba Cloud has experienced frequent personnel changes, which may have a certain impact on its strategic direction and overall valuation,” said Zhang Xiaorong, director of the research institute Shendu Technology. “During the critical period when Alibaba Cloud plans to go public, the company’s leadership is likely to take corresponding measures to ensure business continuity and stability.”
In the June quarter, Alibaba Cloud revenue grew 4 per cent year on year to 25.1 billion yuan, ending six consecutive quarters of declining growth, but still far from its 33 per cent growth in the September quarter of 2021.
Daniel Zhang said on the earnings call in August that the cloud unit was still dealing with the impact of declining demand after the pandemic as people shift away from remote work. However, there is still “huge potential” for cloud penetration in China, he said.
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With Wu now at the helm, the cloud business is headed by someone with more technological experience compared with Zhang’s business management background, according to Morningstar’s Tam.
“This experience should give [Wu] a better understanding of the cloud business compared with Daniel Zhang, whose original background was in finance and accounting,” Tam said.
