Alibaba’s big breakup leads to IPO hopes, staff layoffs

Business & Technology

Alibaba will split into six separate entities with individual CEOs and boards, with several opting to pursue stock exchange listings.

Eduardo Jaramillo
Illustration for The China Project by Alex Santafé

Alibaba’s cloud computing unit has decided to cut around 7% of its staff as part of an overhaul that is likely to include an eventual IPO, several media outlets reported yesterday, citing individuals familiar with the situation. Some of the employees in question have been notified already and have received severance packages or offers to transfer to new jobs within Alibaba Group.

The move comes after announcements in March that Alibaba Group Holdings would split up its business empire into six separate entities, each with its own leadership team and board.

As Alibaba’s platforms Taobao and Tmall came to dominate Chinese ecommerce, Alibaba Cloud grew into a major business in its own right, becoming the most widely used cloud computing software in the Asia-Pacific region. It has in recent years faced scrutiny by Chinese regulators who have aimed to crack down on major tech firms to protect sensitive user data. Alibaba Cloud was implicated in a scandal in 2021 which involved the transfer of user data to partner companies without users’ consent.

Though in recent years it has lost some market share to Huawei and state-run China Mobile, Alibaba Cloud remains a powerful force. Alibaba Cloud is the only profitable unit of the spinoffs that emerged from the recent breakup, apart from Alibaba’s core Taobao and Tmall ecommerce operations.

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Alibaba breakup

Alibaba Cloud is just one of the six units that emerged from the decision to break up the massive company, announced in March. In addition to the Chinese ecommerce business, which includes platforms Taobao and Tmall and has made up the bulk of Alibaba’s revenue in the past, new spinoffs include an international ecommerce business, a logistics segment, local services like food delivery, and a digital media and entertainment business.

Alibaba Cloud isn’t the only segment that hopes to hold an IPO. Cainiao, Alibaba’s logistics unit, aims to raise $1-2 billion, and the Group’s international ecommerce business, made up of platforms like AliExpress, Trendyol, and Lazada, is also considering a public offering at some point.

Alibaba has not announced precise timelines for establishing each new business. The moves could be part of an effort to overcome the hangover from the regulatory attention that tech firms in general, and Alibaba specifically, have received over the past couple of years. Alibaba was fined nearly $3 billion in April 2021 in a landmark antitrust case, and its revenue growth slowed during the pandemic.

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Eduardo Jaramillo is a staff writer at The China Project. He holds a Bachelor’s degree in History and East Asian Studies from Bowdoin College, and a Master of Arts in Asian Studies from Georgetown University. He has spent a combined two-and-a-half years in Taiwan and China, and now lives in the Logan Circle neighborhood of Washington, D.C. Read more

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