By Brenda Goh and Casey Hall

SHANGHAI (Reuters) -Alibaba Group on Tuesday said its CEO and chairman Daniel Zhang will step down from the roles to focus on its cloud division as the Chinese e-commerce giant moves ahead with a plan to split into six business units.

Zhang has been concurrently serving in three roles since December when he took over as head of the cloud unit after it suffered an outage that it described as its “longest major-scale failure” for over a decade.

The CEO role will be handed over to Eddie Yongming Wu, chairman of Alibaba’s Taobao and Tmall Group, while Executive Vice Chairman Joseph Tsai will take over Zhang as chairman.

Both appointments will take effect on Sept. 10, Alibaba said.

“The appointment of Daniel to focus on running cloud is really a show of confidence and trust in him to take the most precious business and run with it to develop it in the right way given this age of generative artificial intelligence (AI),” said Brian Wong, a former Alibaba employee and author of the book, “The Tao of Alibaba”.

“The idea or expectation that one person could manage the business’ crown jewel Cloud and at the same time manage the entire Alibaba Group is an unreasonable expectation.”

The surprise reshuffle comes after a tumultuous two years that saw Alibaba heavily targeted by increased regulatory scrutiny and after the group announced in March that it would restructure into six units, each with their own boards and CEOs.

Its China-facing e-commerce division, which includes the Taobao and Tmall marketplaces, will stay wholly owned by Alibaba, but the other five units will be spun off, with Alibaba saying in May it aimed to complete the public listing of its cloud unit within the next 12 months.

Zhang, in a memo to staff seen by Reuters, said the cloud spin-off was approaching a crucial stage and that it was the right time for him to dedicate his attention to the business.

“From a corporate governance perspective, we also need clear separation between the board and management team as the Cloud Intelligence Group proceeds down the path to becoming an independent public company,” he said.

“It would be inappropriate for me to continue serving as chairman and CEO of both companies at the same time during the spin-off process.”

Analysts have estimated the cloud unit to be worth $41 billion to $60 billion but have said the reams of data it oversees could put it in the cross-hairs of regulators at home and abroad.

SINGLES DAY

Zhang, a former accountant, joined Alibaba in 2007 and is known for being the architect behind the company’s annual flagship “Singles Day” shopping festival. He has served as CEO since 2015 and took on the chairmanship in 2019, succeeding both roles from Alibaba co-founder Jack Ma.

Alibaba thanked Zhang for his “extraordinary leadership in navigating unprecedented uncertainties affecting the company’s business over the past few years.”

Alibaba’s Hong Kong-listed shares fell 1.5% after the announcement, in line with a 1.6% decline in the benchmark index, as analysts viewed the reshuffle as being in line with the overall restructuring previously announced.

“Under the new structure, the group will play a smaller role in setting strategies for the six business groups, so instilling Alibaba founders Joe and Eddie as chairman and CEO likely serves the purpose of ensuring smooth leadership transition and maintaining culture,” Shanghai based Independent analyst Eric Chen, who publishes on Smartkarma, told Reuters.

Wu, who co-founded Alibaba alongside Ma and Tsai over two decades ago, will continue to concurrently serve as chairman of Taobao and Tmall Group, Alibaba said. His previous roles include chief technology officer of Alipay and chairman of Alibaba Health.

Wu’s elevation to CEO “is a natural transition and signals the unswerving importance of e-commerce in the company’s roadmap,” said Jacob Cooke, co-founder and CEO of WPIC Marketing + Technologies, a Beijing-based e-commerce consultancy.

Cooke said he did not see the leadership changes as signalling a major strategic shift within Alibaba, given that the individuals are co-founders and close associates of Ma.

“If anything, it emphasises the increasing importance of AI in the company’s focus, while also underscoring that e-commerce is the core business unit.”

COMPETITION

Ma, China’s best-known entrepreneur, has stayed out of the public eye since late 2020 after a speech in which he criticised Chinese regulation, and which is widely seen as triggering an ensuing crackdown.

Ma left mainland China in late 2021 – appearing in photographs in Japan, Spain, Australia and Thailand – and returned in March, a day before Alibaba announced its restructuring. He has not made any public comments during that period.

Last week, Alibaba president J. Michael Evans said Ma remained Alibaba’s biggest shareholder and cared very much about the company. He said Ma was teaching at a university in Tokyo and was also spending more time in China.

Chinese tech news outlet LatePost on Monday reported that Ma convened a meeting with leaders from Taobao and Tmall Group where he highlighted severe competition and discussed the need to return focus to users, the internet and Taobao – whose merchants are mostly individuals or small businesses – to stay relevant.

Alibaba did not respond to a Reuters request for comment on the LatePost report, which cited company sources.

(Reporting by Abinaya Vijayaraghavan in Bengaluru and Brenda Goh in Shanghai; Additional reporting by Scott Murdoch in Sydney and Anne Marie Roantree and Josh Ye in Hong Kong; Editing by Muralikumar Anantharaman and Christopher Cushing)

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