Alibaba Breakup Begins With Spinoff of $12 Billion Cloud Arm
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Alibaba Breakup Begins With Spinoff of $12 Billion Cloud Arm
there, but decent sales.
(Bloomberg) -- Alibaba Group Holding Ltd. will explore initial public offerings for its logistics and grocery arms while hiving off its $12 billion cloud business, kicking off the first phase of a much-anticipated breakup to try and revive anemic revenue growth.
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Chief Executive Officer Daniel Zhang outlined the contours of that historic shakeup for the first time, which starts with the listing of its grocery arm Freshippo as early as six months from now, before proceeding to the float of its giant Cainiao logistics arm over the next year to 18 months. Significantly, Alibaba will completely carve out the nation’s biggest cloud services platform as a dividend to shareholders, meaning it could relinquish control of one of its fastest-growing businesses.
Zhang said the cloud spinoff was intended to simplify the structure and respond to market needs. A standalone platform could grow to someday even surpass Alibaba in size if it attracted the right external financing, he said without elaborating. Analysts have in the past argued that private clouds could operate at a disadvantage to state-backed rivals given Beijing’s growing insistence on using government-controlled data storage and internet services.
Investors harbored hopes that Alibaba’s March decision to split itself into six units might galvanize the market, enable the different operations to move more nimbly and fuel a share rebound. Each unit, except for the core Taobao Tmall Commerce Group, was freed to seek independent fundraising and listings.
Still, Zhang unveiled that grand vision after China’s e-commerce leader posted its third consecutive quarter of single-digit revenue growth, reinforcing concerns that a Chinese consumer spending rebound may be farther out than anticipated. Domestic commerce shrank 3% in the March quarter, while the cloud division, the other closely watched business, was down 2% — its first-ever decline on record. Alibaba shares closed 5.4% lower at $85.77 in New York.
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