Alibaba Group Holding targets a full spinoff of its cloud services arm within 12 months to advance the planned restructuring of the Chinese tech giant into six main business groups and eventually pursue public listings for five of them.
The Cloud Intelligence Group is largely independent and has features that differ from those of Alibaba’s consumer-facing businesses, factors that support the full spinoff. The move also is intended to attract strategic investors who can boost the cloud business in the market, Alibaba CEO Daniel Zhang said on Thursday.
The spinoff will be completed via a stock dividend distribution to shareholders, meaning all of the equity that Alibaba owns in the cloud business will be returned to existing shareholders by way of a dividend.
The company also said it aims for an initial public offering of its Cainiao Smart Logistics Group in 12 to 18 months and a public listing for its new retail business Freshippo in six to 12 months. It also will start external financing for Alibaba International Digital Commerce Business Group.
Alibaba reported disappointing quarterly results Thursday. Revenue grew 2% on the year to RMB 208.2 billion (USD 30.1 billion) in the January-March period, a third consecutive quarter of single-digit growth that missed the average estimate of RMB 210.15 billion from analysts surveyed by Refinitiv.
Net income totaled RMB 22 million (USD 3.1 million), compared with a net loss of RMB 18.36 million (USD 2.6 million) in the corresponding period of the previous year.
Total China commerce, which contributes 65% of Alibaba’s revenue, contracted by 3% to RMB 132.1 billion (USD 18.8 billion). Total international commerce rose 29% on the year, but the sector continues to experience losses.
The figure for cloud computing, Alibaba’s second-largest revenue source, was RMB 18.58 billion (USD 2.6 billion), down 2% on the year and shrinking for the first time.
Alibaba said previously it would consider whether to retain control of individual businesses after they go public.
In a conference call with analysts Thursday, Zhang was asked what factors will determine whether Alibaba retains majority control over the businesses after the IPOs. He said the decision will be based on the company’s so-called three core strategies: consumption, cloud and globalization.
“I think that really is the clearest possible expression of which of the businesses we consider to be strategic,” Zhang said.
Alibaba last year suffered from China’s frequent COVID lockdowns and continuous regulatory pressure. The Hangzhou-based company recorded zero growth, the worst in its history, in the second quarter of last year following a strict, two-month lockdown of Shanghai.
“The key question for Alibaba in 2023 is how far Chinese households will dip into the record savings they accumulated during the pandemic,” said Jacob Cooke, co-founder and CEO of WPIC Marketing and Technologies, a Beijing-based e-commerce consultancy.
China posted stronger-than-expected gross domestic product growth of 4.5% for the first quarter, mainly driven by pent-up demand for travel and catering after three years of COVID restrictions. For the first four months this year, the country’s online retail sales rose 12.3% year-on-year.
However, the property sector recovery has been weak, and the country’s youth unemployment rate continues to climb, reaching a record high last month when more than one in five Chinese in the 16-24 age bracket were jobless.
This week Nomura cut its 2023 annual GDP growth forecast for China from 5.9% to 5.5%, saying the post-COVID recovery has been rapidly losing steam as a result of weak confidence among consumers and business investors.
This article first appeared on Nikkei Asia. It has been republished here as part of 36Kr’s ongoing partnership with Nikkei.