Alibaba CEO, chair and head of breakway cloud biz quits suddenly ahead of IPO

Alibaba boss Daniel Zhang has abruptly exited the megacorp and world’s fourth largest infrastructure service provider months before he was due to head the breakway cloud division into an IPO.

In June, the exec announced he was standing down from his roles as group CEO and chairman at the Chinese giant to focus on running the cloud division, and was preparing to hand over those duties.

Co-founder Joseph Tsai yesterday became group chair, in something of an orderly change, yet in addition to becoming group CEO, Eddie Wu was also surprisingly confirmed as interim head of the Alibaba Cloud Intelligence Group, replacing Zhang.

The company made no mention of whether Zhang made the decision to leave or if he was asked to step aside, though no enmity was obvious. The company did say it still plans to forge ahead with a flotation for the cloud division, something it vocalized in March.

“The company will continue to executive its previously announced plan to spin off Alibaba Cloud Intelligence Group under a separate management team to be appointed,” it added in the filing.

Alibaba will be split into six distinct entities, the plan being to raise capital for each.

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Zhang spent 16 years on the board, serving as Alibaba Group CEO since 2015 and as chairman since 2019. His departure has rocked the market, causing the share price slide more than 4 percent today as investors digested the news, and mulled fears of a delay to the cloud spin-off.

The timing of the exit is also causing some confusion, coming on the day the hand over for the Alibaba Corp roles was due to take place.

According to a letter sent to employees by Tsai – seen by the FT – he said Zhang, who had replaced co-founder Jack Ma as leader, was a calming influence at the business during some difficult times.

"After taking the helm as chair four years ago, Daniel confronted myriad challenges, including the Covid-19 pandemic and dramatic changes in the business environment. Yet, with his steady hand, Alibaba navigated and overcame challenges with grace and fortitude."

Tsai also said Alibaba plans to invest $1 billion in a tech fund that Zhang founded, saying the exited exec will "switch to a different approach and continue to fight alongside us at Alibaba," as per Nikkei, and that he'll "support Alibaba in creating a better ecosystem for its future technological layout."

The challenges faced by Alibaba are certainly different in a post pandemic world, one in which rivals AWS, Microsoft, and Google are also noting the slowdown in orders. Customers are feeling the pinch of declining business confidence in the face of inflation, the war in Ukraine and other sentiments.

Alibaba is not immune, and in the quarter ended June it reported revenues of $2.64 billion, up 4 percent year-on-year, which – while still positive – is a huge difference from the rates posted when the world was caught in the grip of the novel coronavirus.

Although Alibaba has fierce rivalries with the major American cloud providers, it has amassed massive sales in the local Chinese market, where it had a 34 percent market share in calendar Q2, according to Canalys.

Li Chengdong, head of Beijing-based think tank Haitian, told Reuters that Zhang's departure appeared to be a personal decision, and highlighted growing competition from state-owned telecom companies and Huawei.

"Alibaba Cloud has lost some ground with government and state-owned enterprise clients, which were previously a stronghold for the company."

"During his leadership tenure, Alibaba Cloud's business did not improve significantly despite his efforts. Zhang likely realised that the challenges facing Alibaba Cloud's lacklustre growth were beyond what he could influence or control as an individual executive," Lee further told the newswire.

We have asked Alibaba to comment further. ®