Trade: Online giant Alibaba plans to split into six areas

Online giant Alibaba plans to split into six divisions

Women wearing face masks walk past the offices of the Chinese e-commerce company Alibaba. photo

© Andy Wong/AP/dpa

The Chinese online group Alibaba has grown rapidly in recent decades – but then it was targeted by the Chinese authorities. Now the giant is divided into six “baby babas”.

The Chinese online trading giant Alibaba wants to split into six smaller companies. Business areas such as online trade, media and cloud services become independent. That would turn the $220 billion empire into a tech holding, which is rare in China. Each area should have the opportunity to raise debt and seek an IPO, Alibaba announced on Tuesday.

The move comes a good two years after the Chinese government cracked down on the tech giant. Among other things, company founder Jack Ma had fallen out of favor, according to media reports. The IPO of the fintech company Ant Group, which was part of the group of companies, was canceled and antitrust proceedings were opened against Alibaba. Recently, however, there have been increasing signs that Beijing’s tough stance on technology companies is being relaxed. Among other things, Jack Ma also appeared in China this week for the first time in more than a year.

Growth stunted by government

Despite the split that has now been announced, the already planned cost reductions should not be neglected, emphasized Alibaba. They had become necessary because the government’s crackdown slowed growth at Alibaba and caused a loss of around half a trillion dollars on the stock exchange. Previously, Alibaba had grown strongly for two decades, also thanks to massive investments.

The local retail business in China will remain a wholly owned subsidiary. Shares listed in the US were up around nine percent in early trading.

The market is the best litmus test, company boss Daniel Zhang wrote in an email to the workforce. The restructuring will enable all business areas to react more quickly to market changes. Zhang will continue to lead the group in the future. Market observers took the planned split as a signal that Alibaba is ready to raise money on the capital market in the future.

The individual business areas are to have their own chairmen and board members. Zhang will also lead the cloud division. Observers see this as a sign that technologies based on artificial intelligence (AI) should play a greater role.


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