Top deck reshuffle to help Alibaba in corporate governance, analysts say

The latest leadership changes at Chinese technology heavyweight Alibaba Group Holding Ltd will help improve the company's corporate governance structure and positively impact its long-term development amid fierce competition from local rivals, industry analysts have said.

The move, they added, is in line with the overall restructuring plan that the company had announced in March.

Late on Sunday, Alibaba said Daniel Zhang would step down as chairman and CEO of its cloud business.

This came less than three months after the company had said that Zhang would move away from his role as chairman and CEO of Alibaba to focus on the cloud division.

Zhang had previously served concurrently in the three roles, heading the company as well as its cloud unit.

On Sunday, Zhang handed over the chairman's role to Joseph Tsai as scheduled, while the CEO's position was taken up by Wu Yongming, who will also lead Alibaba's Cloud Intelligence Group as its chairman and CEO, the company said in a statement.

Zhang joined Alibaba in 2007 and is credited with creating the company's annual Singles Day online shopping extravaganza. In 2015, he took over as CEO from Alibaba co-founder Jack Ma, and succeeded Ma as chairman in 2019.

Alibaba will invest $1 billion in a technology fund that Zhang will establish, Tsai said in an internal letter to Alibaba employees on Sunday.

"The fund will support Alibaba's strategy of investing for future growth and continuing to develop our technology ecosystem," he said.

Alibaba had said that it would split into six business groups, each with the ability to raise external funding and go public. This was seen as the most significant reorganization in its 24-year history.

Jiang Han, a senior analyst at market consultancy Pangoal, said the change in Alibaba's executive leadership marks a milestone for the company's management and a key step in its future development.

He said Alibaba had completed its leadership transition, which will be conducive to further improving its corporate governance, better implementing its strategic plans, and maintaining the stability and sustainability of the management.

Both Tsai and Wu are widely experienced and have a solid business background, with a clear understanding of the company's future development strategy, he added. The leadership rejig also indicates that Alibaba aims to enhance the company's core competitiveness and speed up its innovative development.

Alibaba said in May that it had approved a full spinoff of its cloud unit, aiming for the division to become an independent listed company within the next 12 months.

On Sunday, the company said it would continue to execute its previously announced plan to spin off Alibaba Cloud Intelligence Group under a separate management team.

"Alibaba's cloud business has become a key growth engine and pivot apart from its core e-commerce unit, but it also faces sluggish growth in revenue," said Zhang Zhouping, a senior analyst of business-to-business and cross-border activities at the Internet Economy Institute, a domestic consultancy.

The challenge for Alibaba Cloud is how to maintain growth under an increasingly complex environment, he added.

Alibaba's latest financial results show that revenue from its cloud computing business stood at 25.12 billion yuan ($3.4 billion) during the April-June period, an increase of 4 percent year-on-year, mainly driven by storage, networks and artificial intelligence computing-related products.

Alibaba is not only facing mounting challenges from domestic e-commerce platforms such as JD and Pinduoduo, but also short-video and livestreaming apps such as Douyin and Kuaishou. So, it has to adjust its strategy and layout in the main battlefield, said Pan Helin, co-director of the Digital Economy and Financial Innovation Research Center at Zhejiang University's International Business School.