In this Supply Chain Matters Breaking Technology News update, we alert readers to an unexpected announcement from China based online retail platform provider Alibaba.
Alibaba Group Holding has called off a previous announced spinoff of its Cloud infrastructure hosting business, reportedly stunning investors and casting doubt on a significant corporate restructuring announced nine months prior.
The wide scale restructuring that was announced in April was characterized by Bloomberg as the most radical corporate overhaul in the online retailer’s history. It called for the forming of an overall holding company and six business entities including what was to be termed as the Cloud Intelligence Group that would umbrella the company’s Cloud and artificial intelligence technology elements. This unit was being planned for an IPO listing in May 2024.
The announcement came in conjunction with the reporting on financial performance for the September ending quarter. The report was headlined with an 8.5 percent increase and revenues and the equivalent of $3.8 billion in profitability compared with a year-over-year reported quarterly loss.
According to the latest reporting from Bloomberg, Alibaba management indicated in a statement that:
“The recent expansion of U.S. restrictions on export of advanced computing chips has created uncertainties for the prospects of Cloud Intelligence Group. Accordingly, we have decided to not proceed with a full spin-off, and instead we will focus on developing a sustainable growth model for Cloud Intelligence Group under the fluid circumstances.”
The report further indicates that the Cloud division aims to be the heart of Alibaba’s advanced AI and ChatGPT initiatives requiring the use of more powerful GPU processors provided by Nvidia, which are now barred from export to China based technology firms.
In its reporting, The Wall Street Journal cited market research firm IDC data indicating that Alibaba Cloud is Asia’s largest public Cloud services provider. The business unit is note as being the second-largest business by revenue, after the online retail business.
Disappointing Singles Day Shopping Holiday
The report further reinforces that the recently completed China Singles Day online shopping holiday provided what was phrased as disappointing GMV sales levels. Both Alibaba and rival JD.com– “reportedly managed only single-digit percentage growth during this signature annual shopping festival, outpaced by smaller but more innovative social media rivals like Douyin and Kuaishou Technology.”
Added Perspectives
This rather unexpected news concerning Alibaba’s Cloud unit certainly calls into question the ongoing status of the five other planned spinoff entities. As noted in the Bloomberg cited report, a lot has to do with the current struggling state of China’s economy and the reality of new plateau’s being reached in online retail order volumes.
Unlike Alibaba, Amazon has initiated ongoing efforts in spurring added growth in the company’s AWS Cloud unit along with added investments related to advanced AI and ChatGPT services for both business and IT clients and leveraged use within Amazon’s other business units including online retail and Amazon Prime Logistics.
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