The dismantling of Alibaba begins. The Chinese tech giant took the opportunity of the publication of financial results to announce the IPO of its logistics and grocery branches while splitting its cloud activity (cloud computing). If these are the first concrete decisions since the announcement, at the end of March, to separate its six main activities into independent units, the group founded by Jack Ma took everyone by surprise when it unveiled a plan to completely relinquish control of Alibaba Cloud.
Concretely, this activity, which some analysts estimate at 30 billion dollars, will become an independent entity listed on the stock exchange during the next twelve months thanks to a distribution of dividends in shares. Alibaba may end up holding no shares of China’s largest cloud services platform.
” Confusing “
As with its American counterpart Amazon with Amazon Web Services, this cloud activity has experienced tremendous growth in recent years, taking over from more mature e-commerce activities. Alibaba has invested tens of billions of dollars over more than a decade in computer hosting, outpacing rival offerings from Tencent and Baidu and making it a priority for its development. General Manager Daniel Zhang explained that this cloud split was aimed at simplifying the structure and meeting market needs. A standalone platform could one day even surp the size of Alibaba if it attracts the right external funding, he believes.
In fiscal year 2022, cloud generated nearly $12 billion in revenue, or 8% of company revenue. When Alibaba first disclosed its dismantling into six entities, Daniel Zhang personally took over as head of this unit, which was interpreted as proof of the high importance of the activity. “This complete spin-off plan involving AliCloud is both audacious and confusing,” Nomura analysts said. AliCloud is Alibaba’s organic business and is still considered one of the group’s long-term drivers, even though its growth has temporarily slowed in recent quarters. The move is positive overall, although the move could introduce some valuation dilution, Citi analysts said in a note.
But the activity is not as flourishing as in the past and could slow down its valuation. In the first three months of the year, the cloud unit recorded a 2% year-on-year decline, the first quarterly decline ever. Under the impetus of Beijing, which has made the cloud one of the strategic economic sectors, the emergence of state actors has intensified competition and challenged the Alibaba/Tencent duopoly. “The public cloud services offered by Zhongke Sugon, Inspur, Unisplendour, CESTC, China Telecom, China Mobile or China Unicom are often favored by infrastructure companies and public administrations that meet more stringent security guidelines and/or criteria. or less explicit from the authorities”, notes the economic service of the French emby in Beijing in a note published at the end of 2022.
In addition, a collective of public enterprises led by China Telecom launched the first national public cloud service, supported by the Public ets Administration and Supervision Commission (SASAC), in July 2022. In the past two years , some local governments and public companies had migrated from cloud platforms operated by private companies to platforms controlled or owned by Sasac-affiliated companies.
The beginning of the great dismantling of Jack Ma’s empire was announced as China’s e-commerce leader posted its third consecutive quarter of single-digit revenue growth, heightening concerns that a rebound in Chinese consumer spending could take longer after three years of a drastic “zero Covid” policy. Alibaba’s revenue rose 2% in the first calendar quarter to 208 billion yuan ($30 billion).