Alibaba, China’s largest technology company, restructures into six subsidiaries

What happened now? Unexpectedly, Chinese tech giant Alibaba has announced plans to split itself into six distinct business groups. The company is reportedly planning to offer IPOs to at least five of the six companies, although it is not yet known when that might happen.

The split companies will focus on six areas of the technology sector, including cloud computing, e-commerce and logistics. According to Nikkei Asia, new companies will include Cloud Intelligence Group, Taobao Tmall Commerce Group, Local Service Group, Cainiao Smart Logistics, Global Digital Commerce Group and Digital Media and Entertainment Group.

All six subsidiaries will operate independently under the direction of their current executives and board of directors. All firms will be part of the Alibaba Group, led by current CEO Daniel Zhang. Zhang will also be CEO of Cloud Intelligence Group, the company’s cloud and artificial intelligence arm.

In a letter to employees on Tuesday, Zhang announced the upcoming restructuring, saying the overhaul will help the company “become more agile, improve decision-making and enable it to respond more quickly to market changes.” The restructuring is part of its ongoing move towards a “more flexible organizational structure”.

The announcement came just a day after flamboyant founder Jack Ma returned to China after spending about a year abroad. Ma’s stay abroad coincided with China’s severe Covid-19 restrictions that have affected the general population, small businesses and large enterprises. It is not immediately known where Ma spent the last year.

The restructuring comes at a time of significant downturn in Alibaba’s multi-billion dollar retail business. Consumers across China have squeezed their wallets due to a sluggish economy, largely to blame for China’s controversial COVID-19 policies.

Alibaba Group Holding Limited is one of the world’s largest technology companies operating in many sectors including cloud computing, internet, artificial intelligence and more. However, it is best known for its e-commerce business and electronic payment services. The company was founded in Hangzhou and is headquartered in the Cayman Islands.

Following the announcement, Alibaba’s ADRs are up more than 14% on the NYSE and currently stand at $98.52 from a closing price of $86.12 on Monday. Analysts believe the stock has much more upside potential in the coming days as Citigroup’s Alicia Yap raised its price target to $156.

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