The new head of Alibaba and its prized cloud and artificial intelligence division told employees that the Chinese tech giant will emphasize artificial intelligence, user experience and nurturing a younger generation of leaders. So far, the stock market has shrugged its shoulders.
Eddie Wu, the CEO of Alibaba (ticker: BABA) and its cloud division, said the company’s two main strategic focuses going forward will be “users first” and “AI-driven,” according to a memo to employees, that Barron’s has viewed. The company will “recalibrate our operations around these two core strategies and reshape our business priorities,” Wu told employees, adding that “over the next decade, the disruption caused by AI across all sectors will be the most significant driver of change.”
Wu’s memo came on his third day as Alibaba’s CEO and the first since the company announced he would also lead its cloud division, a role former group CEO Daniel Zhang wanted to take over. The leadership change does not change its plans to spin off its cloud and AI business to shareholders, the company said – and presumably does not change the refocusing of a group on AI.
At first glance, the memo looks like a standard message from a new CEO, albeit one that emphasizes the importance of cloud and AI to the entire company, even if that division is soon to be spun off.
While Alibaba remains the be-all and end-all of Chinese e-commerce, cloud computing has emerged as a high-growth area for the company, and its focus on AI has helped propel the company beyond investor enthusiasm in 2023 the new technology benefits. The importance of AI shouldn’t be reiterated It can’t hurt, although it could raise eyebrows given a slowdown in China’s economy that threatens consumer behavior at the core of the business.
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Perhaps the more notable element of Wu’s memo is that the company will place an emphasis on younger employees, promoting over the next four years those born after 1985 and in the 1990s to form the core of the company’s leadership teams.
“I firmly believe that as long as we return to our start-up mindset, do not dwell in the past and do not get stuck in our old ways, Alibaba will be rewarded with tremendous growth and create even greater value in AI.” said Wu.
The stock market’s reaction to the early days of Wu’s leadership and Zhang’s escape from the cloud business was muted, if slightly negative. U.S.-listed shares of Alibaba fell 0.2% in premarket trading on Tuesday, after plunging 1.5% on Monday as investors digested news of the management shakeup.
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While the market doesn’t seem enthusiastic, analysts may be more level-headed.
“The leadership change in the cloud business could be a surprise to the market,” analysts led by Ronald Keung of Goldman Sachs, who rate Alibaba shares “buy,” wrote in a note on Monday. “Overall, we remain positive on Alibaba’s aligned leadership focus…investors will look to further clarity/updates from the new management team.”
Wu’s memo doesn’t exactly provide the further clarity that Alibaba’s investors were looking for. But for a company that rarely makes forward-looking statements, it’s still something.
Write to Jack Denton at [email protected]