Just months after agreeing to manage the business’s cloud division, Daniel Zhang, the former CEO of Alibaba Group Holding Ltd., has opted to resign. This decision adds more uncertainty to the situation facing China’s largest e-commerce giant as it navigates a difficult separation.
Alibaba announced in an internal document obtained by Bloomberg News that Zhang had opted to leave her position as head of the company’s cloud division. The executive gave up his dual positions as chief executive officer and chairman to Eddie Wu and Joseph Tsai, respectively, and then assumed that crucial position within the company. Close friends and business partners of Alibaba co-founder Jack Ma, Wu and Tsai, officially assumed their positions on Sunday.
Investors worried about the effects on Alibaba’s biggest business after e-commerce and ongoing reorganization saw its shares drop as much as 3.5%, their sharpest decline in three weeks.
Zhang is being replaced by Tsai and Wu as the Hangzhou-based business navigates a challenging restructuring that will divide the Chinese internet leader into many autonomous companies in industries like cloud services, logistics, and online retail. The two are now in charge of turning around a $230 billion company that has been struggling to regain its footing ever since Beijing launched its legislative offensive against the internet industry in 2021.
With Zhang’s departure, an illustrious eight-year reign that saw Alibaba grow to become China’s largest corporation and foray into new markets like physical retail, which became one of the company’s fastest-growing divisions, comes to a close. Zhang’s resignation was verified by an Alibaba spokesman. On behalf of Alibaba, the former CEO will now manage a $1 billion technology investment fund.
Goldman Sachs analysts, including Ronald Keung, wrote that the market might be surprised by the disclosure of the leadership shift for the cloud company. Investors will be paying close attention to any more information or updates from the new management team regarding the newest organizational strategies of Alibaba Group and the capital market plans of its various subsidiaries.
His departure comes as there are indications that the company’s transformation isn’t going as smoothly as anticipated. A Hong Kong initial public offering of Alibaba’s Freshippo grocery chain has been postponed for the time being because the company was unable to obtain the desired value, according to Bloomberg News. Prior to its own debut, the cloud division Zhang managed is separately attempting to collect up to 20 billion yuan ($2.7 billion), including from Chinese state firms.
Some observers had predicted that Zhang would continue to lead the $11 billion cloud company, which offers internet services to businesses all across the world and drives research in fields like artificial intelligence.
Business titans who oversaw the technology and strategy that supported China’s former most valuable corporation—co-founded by Ma, Tsai, and Wu in 1999 at the start of China’s internet industry—have succeeded him. However, around 2020, Alibaba found itself at the center of Xi Jinping’s tech crackdown on the country’s most influential private enterprises, which halted once-aggressive expansion plans and destroyed growth throughout large areas of the industry.
Alibaba, a barometer for Chinese spending, has suffered with geopolitics and a faltering home economy in addition to regulatory uncertainties. Other e-commerce sites like PDD Holdings Inc. and brief movies like those from ByteDance Ltd., which are progressively moving into online commerce themselves, are also posing a serious threat.
What Bloomberg Intelligence Says
The sudden resignation of Daniel Zhang, the CEO and chairman of Alibaba’s cloud division, less than two months after his hiring increases the possibility that the company’s new partners will influence major cloud decisions going forward. On September 4, Bloomberg reported that Alibaba was in discussions with Chinese state-owned enterprises about obtaining funding for its cloud unit. Zhang will continue to operate the $1 billion technology investment fund that Alibaba recently formed, contributing to the ecology of the company.
The challenge for the new leadership is to determine out how to carry out a historic restructure intended to energize Alibaba’s many businesses. Alibaba has stated that with the changes, it hopes to function as a true investment holding company, where different units can go for funds and list independently.
Deal-maker and Yale alumnus Tsai, who is well-liked by investors, is anticipated to play a big part in managing markets and Alibaba’s most important backers. Tsai, a former lacrosse player who is perhaps best known in America as the owner of the Brooklyn Nets, is well-versed in the industry because, together with Ma, he was present when Alibaba was founded in a Hangzhou apartment on a lake.
Wu, a lesser-known character, was also with Ma from the outset. The company’s advertising platform and Alipay, a service similar to PayPal that is now a part of the Ma-backed Ant Group Co., are credited to the former computer science student. He later founded a venture capital firm that oversees a portfolio of software and autonomous driving projects worth roughly 10 billion yuan ($1.4 billion).
Wu will take over as chairman and CEO of the cloud company in Zhang’s absence.