Ex-CEO Of Alibaba Exits Cloud Unit, Shares Drop 4%

(CTN News) – Alibaba Group’s Hong Kong-listed shares dropped more than 4% on Monday after Daniel Zhang, the former CEO of the company, abruptly stepped down from his position as head of its cloud computing division.

It has been confirmed by Alibaba that Zhang will be leaving the company, and that co-founder Eddie Wu will take over as the interim CEO and chairman of the unit in an internal letter obtained by Reuters. Earlier this week, Zhang officially appointed Wu as the group CEO of the company.

With a 34% market share, the company is said to be China’s largest cloud service provider, according to research firm Canalys.

Alibaba’s restructured company will also include DAMO Academy, Alibaba’s research division for chips and artificial intelligence, which is scheduled to be spun off from by the end of May next year as a part of the restructured company.

As the company stated in June, Zhang had previously been in charge of both the company and the cloud intelligence division at the same time, and he would step down from both positions to concentrate solely on the cloud business.

Zhang’s departure appears to be a personal choice, according to Li Chengdong, the president of the Haitun think tank in Beijing, which is focused on e-commerce, and comes as Alibaba Cloud will have to deal with tougher regulations, increased competition from China’s telecom companies, and Huawei Technologies.

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

Despite Zhang’s best efforts, Alibaba Cloud’s business did not improve significantly during his tenure. “It is likely that he realized that the challenges facing Cloud’s lackluster growth were far greater than he could influence or control on his own as an executive.”

Alibaba Cloud’s listing plans will not be significantly affected by Zhang’s departure, since it will depend on the unit’s performance, and Alibaba will continue to execute the spinoff plan under a separate management team.

Union Bancaire Privee’s managing director, Vey-Sern Ling, viewed the move positively, noting that it would enable Alibaba and the cloud business to start from a “clean slate.”

This letter stated that Alibaba would continue to support Zhang by “channeling his expertise differently” and that it would provide $1 billion for the establishment of a technology fund that Zhang planned to establish.

The company awarded Zhang the title of “emeritus” for the first time in its history.

Analysts estimate that the cloud unit is worth between $41 billion and $60 billion; however, due to the vast amounts of data it manages, it may come under scrutiny from domestic and foreign regulators.

SEE ALSO:

AMC Stock Price Forms Bullish Divergence – Is It Time To Buy?