Chinese tech giant ALIBABA Group said today (March 28) it will split into six different business groups that can independently raise funding or go public. The announcement came a day after Alibaba founder Jack Ma was seen in mainland China for the first time after living overseas for more than two years. The restructuring and Ma’s return to China spark hopes for a change in the Chinese government’s attitude toward tech companies after several years of harsh crackdown.
Alibaba is one of the largest tech companies in the world with a market cap of $261 billion, about half the size of Meta. Last year, it generated $123 billion in revenue, of which $6 billion was profit. Alibaba shares traded on the New York Stock Exchange jumped more than 13 percent today.
After the breakup, each business group will be managed by its own CEO and board of directors. The current Alibaba Group will be the holding entity of the six new companies, which are:
- Cloud Intelligence Group: cloud and artificial intelligence
- Taobao Tmall Commerce Group: online retail
- Local Services Group: food delivery service (Ele.me) and mapping
- Cainiao Smart Logistics: logistics service
- Global Digital Commerce Group: international e-commerce businesses, including AliExpress and Lazada.
- Digital Media and Entertainment Group: streaming and movie
Alibaba, whose business spans retail, digital payment, cloud services and entertainment, has struggled with slowing growth and heightened regulatory scrutiny in recent years. Last year, it laid off nearly 20,000 employees, about 10 percent of its total workforce. The breakup will allow the company to be more agile and respond to market changes faster, CEO Daniel Zhang said in a statement today.
It’s not uncommon for large conglomerates to break up into smaller companies when they encounter financial difficulty. Cendant, a collection of real estate, travel and entertainment companies, broke up into four companies in 2005. This year, General Electric began its split into three businesses.
Jack Ma returns to China after two years of apparent exile
Alibaba and its founder Jack Ma were at the center of the Chinese government’s crackdown on private-sector tech companies in the past two years.
Ma, 58, retired from Alibaba in late 2018 to focus on philanthropy but remained active in the media and widely seen as the face of Alibaba. The flamboyant billionaire abruptly vanished from the public eye in late 2020 after he openly criticized the Chinese government for stifling innovation.
In November 2020, Chinese financial regulators called off a $37 billion initial public offering of Ant Financial, a fintech conglomerate owned by Ma. A few months later, Alibaba was hit with a $2.6 billion fine for violating antitrust laws. The fine is the largest ever imposed on a business in China.
Ma was reportedly living in Europe and Japan for the past two years. In October 2021, Ma’s super yacht was seen anchored off the coast of the Spanish island of Mallorca. In July 2022, he showed up at a university in the Netherlands for a sustainable farming program. And in November, he was seen frequenting private clubs in Tokyo.
Yesterday (March 27), Ma made a public appearance in China for the first time since 2020. He visited an Alibaba-funded school in Hangzhou, where Alibaba is headquartered. During the visit, Ma discussed the challenges artificial intelligence bring to education, according to an article posted on the school’s WeChat account.