When the outside world was eagerly anticipating the first financial report after the new CEO Wu Yongming took office, Alibaba (BABA. NYSE, 09988. HK) unexpectedly released two other heavyweight news - the split of Cloud Intelligence Group was no longer advancing; Hema Fresh's IPO plan is temporarily suspended.
Source: Enterprise Financial Report
At the same time, Alibaba announced that the first batch of strategic innovation businesses -1688, Xianyu, DingTalk, and Quark - have emerged.
Regarding a series of adjustments, Wu Yongming stated in a tone: "No matter how successful the past business model may have been, it is necessary to turn the page to zero and awaken the mindset of starting a new business. In the next 10 years, the world will undergo earth shaking changes, with huge uncertainties and opportunities emerging simultaneously. Alibaba is embarking on a new entrepreneurial journey and preparing to fully invest in technological change
After nearly a year of turmoil and change, Alibaba has redrawn its strategic map by the end of 2023: facing the future, Alibaba will have three important priority directions: technology driven internet platform business, AI driven technology business, and globalized business network.
From Jack Ma to Zhang Yong, and then to Cai Chongxin and Wu Yongming, the helm of Alibaba, a commercial giant ship, constantly changes. Alibaba, which used to be "unable to find an opponent with a telescope," is gradually losing speed in the treacherous internet world.
Can Wu Yongming's redrawn strategic map become Alibaba's navigation map for the next 10 years? In the turbulent sea, where is Ali's next stop?
Separation and transformation
According to Alibaba's initial spin off and listing plan, Hema is expected to complete its listing within 6 to 12 months, Cloud Intelligence Group will complete its spin off and listing within 12 months, and Cainiao is expected to complete its listing within the next 12 to 18 months.
Cainiao was the first to submit the form to the Hong Kong Stock Exchange. But after more than a month, Alibaba suddenly announced that due to various uncertain factors, it will no longer promote the complete separation of the Cloud Intelligence Group. Meanwhile, Hema's initial public offering plan has been suspended.
Regarding the emergency "brake" of Alibaba Cloud's spin off, Wu Yongming stated on the financial report conference call: "The recent expansion of restrictions on the export of advanced computing chips by the United States has brought uncertainty to the prospects of Cloud Intelligence Group
On October 18th, it was reported that the US Department of Commerce will further tighten export controls on chips to China.
From an industry perspective, the global cloud market, including cloud companies such as Amazon AWS, Microsoft Azure, and Google Cloud, all rely on their parent companies for business operations, and there has never been a large-scale public cloud IaaS (infrastructure) business that has been separately split and listed. In the context of the AI computing arms race, these cloud vendors need the support of their parent companies even more.
Alibaba Cloud is the technical foundation of Alibaba series products, which can be seen to some extent from the recent Alibaba Cloud anomaly that caused Alibaba series product failures such as Taobao, Xianyu, and DingTalk. Wu Yongming stated that Alibaba will be AI driven in the next 10 years, and Cloud Intelligence Group is the carrier carrying this mission.
Therefore, Alibaba proposed in its financial report that a complete split of the Cloud Intelligence Group may not enhance shareholder value as originally envisioned, and therefore decided not to proceed further. Instead, facing an uncertain environment, Alibaba focused on establishing a sustainable growth model for the Cloud Intelligence Group.
Compared to the sudden "brake" of Alibaba Cloud's comprehensive split, the suspension of Hema's IPO has long been a sign.
In September, there were media reports that Alibaba was shelving its Hema Hong Kong listing plan. Due to the sluggish investment climate in consumer stocks, the post listing valuation may only be $4 billion, far below the $6 billion to $10 billion target set when considering raising new financing last year.
Why can't Hema get an ideal valuation? Retail analysts believe that on the one hand, the liquidity performance of Hong Kong stocks this year is poor, and corporate valuations are generally poor. On the other hand, the activity of retail and food companies this year is also average. Companies such as Laoxiang Chicken and Wolong Food have voluntarily terminated their IPOs, and Alibaba's decision to do so is not surprising.
Hema, born in 2015, is a new attempt by Alibaba to focus on new retail formats, with Hou Yi serving as the CEO. At first, Hema did not consider whether it was "profitable" or not. With the full support of Alibaba, Hema attempted various business formats, including Hema Fresh, Hema F2, Hema MINI, Hema Mali, Hema Mini Station, Hema Market, Hema Pickn go, Hema X Club, Hema Neighborhood, and Hema Ole.
It was not until June 2021 that Alibaba announced an organizational upgrade and fully implemented a business responsibility system that Hema began to take responsibility for its own profits and losses; Half a year later, Alibaba further upgraded its "diversified governance" system, and Hema transformed from a business group to an independent company, making the demand for profitability even more urgent.
In January of this year, Hou Yi stated in a letter from all employees that Hema Fresh, the main business form of Hema, has achieved profitability. In April, he also stated that Hema had achieved comprehensive profitability in the fourth quarter of last year and the first quarter of this year.
However, despite the seemingly positive development trend, there are still numerous obstacles and threats hidden from both inside and outside: the rapid expansion pace, the uncertainty of initial profits, and thorny supply chain management issues that Hou Yi urgently needs to answer.
Regarding the suspension of Hema's initial public offering plan, Alibaba stated that it is evaluating the market conditions and other factors necessary to ensure the successful implementation of the project and enhance shareholder value.
A year full of variables
'Change' has been running through Alibaba over the past year.
Market observers have pointed out that a company with a market value of hundreds of billions of dollars has announced such a drastic restructuring and splitting plan, but due to changes in actual circumstances, it will be readjusted in less than half a year, which is rare worldwide.
In March of this year, Alibaba launched the largest organizational change in 24 years, splitting an Alibaba group into "1+6+N": 1 holding group, 6 business groups, and N business companies.
In May, Alibaba announced the list of board members for all business groups, as well as the listing and financing plans for some business groups. Afterwards, Hema, Yun, Cainiao and other businesses all disclosed their listing schedules.
The structural changes are accompanied by personnel changes. The surface of 'one dismantling six' is decentralization, but in reality, what is more crucial is personnel reshuffle, with some 'retired veterans' returning to take charge of the branch.
For example, Cai Chongxin, Peng Lei and Wang Jian, members of the Alibaba Partner Committee who were not in specific management positions at that time, all appeared on the boards of directors of 1-2 business groups. At the same time, Wu Yongming and Tong Wenhong, co founders of Alibaba and members of the "Eighteen Arhat", returned.
Meanwhile, financial report data shows that in the first nine months of this year, Alibaba reduced a total of 14785 employees. This means that employees have to fluctuate in the adjustment process every once in a while.
In September, the intense and violent personnel changes further concentrated power in the hands of Ali's "Eighteen Arhat". Cai Chongxin took over the chairman of the board of directors of Alibaba Group, and Wu Yongming served as CEO. Zhang Yong retired from the center of power and originally planned to serve as the Chairman and CEO of Cloud Intelligence Group full-time, also replaced by Wu Yongming.
On the third day of officially taking over as the CEO of Alibaba Group, Wu Yongming had his first communication with Alibaba people in the form of a signed letter from all employees. The times are changing, Alibaba must change! The times are advancing, Alibaba must progress even more! "In the letter from the entire staff, Wu Yongming once again emphasized the importance of" change ".
User first and AI driven have become the two major strategic focuses drawn by Wu Yongming for Alibaba's future development. Around the two major strategic priorities, Alibaba will reorganize all businesses and reshape their strategic priorities.
Behind this, 24 year old Alibaba is competing against Lin Li, and its core business is constantly being eroded by powerful enemies. According to a Goldman Sachs Global Investment Research Report, Taobao Tmall's market share has decreased from 66% in 2019 to around 44% in 2022, a significant drop of one-third over four years. During the same period, the competitors of JD kept stable at about 20%, and Pinduoduo increased from 10% to 18%. The rapid rise of Tiktok and Kwai, the main share of the encroachment, came from Taobao and Tmall.
Meanwhile, the cloud business, which is regarded as the second growth curve, saw revenue growth rates of 84%, 62%, 50%, and 23% in fiscal years 2019 to 2022 (after offsetting the impact of cross segment transactions), showing a declining trend year by year. By fiscal year 2023, the revenue growth rate of the cloud business had even dropped to 4%.
Dare to take risks and gamble. "An old Alibaba person commented on Wu Yongming. In the Alibaba system, Wu Yongming led a team to start a business, built Alibaba Mama as the marketing platform for Alibaba e-commerce, and also led the participation in the investment and acquisition case of Gaode; Outside the Alibaba system, he founded Yuanjing Capital as a founding partner and has invested in fields such as hard technology, new car manufacturing, digital healthcare, and industrial internet.
The "Eighteen Arhat" who retired to the second tier returned to the front again to charge. Whether Cai Chongxin and Wu Yongming can lead Ali out of the predicament still needs time to verify.
Draw a new strategic map
At the time of the giant ship's loss, the reduction of the Ma Yun family trust has brought a lot of speculation to the outside world. According to two 144 forms disclosed by the United States Securities and Exchange Commission (SEC), JC Properties Limited and JSP Investment Limited, wholly-owned by Jack Ma Family Trust, plan to sell Alibaba founder shares on November 21, both of which are 5 million American Depositary Shares (ADSs), with a total market value of $870.7 million.
On November 18th, in response to the recent plan to reduce the holdings of Jack Ma's family trust, Jack Ma's office lawyer replied that the disclosed sale plan is a long-term plan. The plan currently does not have any actual reduction in holdings. Jack Ma is firmly optimistic about Alibaba, and the current stock price is far below its actual value. He will still firmly hold Alibaba's stock.
As staunch partners of Jack Ma, Cai Chongxin and Wu Yongming bear a heavy burden. After taking on the new CEO role, Wu Yongming drew a brand new strategic map for Alibaba. The new leadership team has formulated a new strategy for the next 10 years, which not only supports the independent development of Alibaba's various business lines, but also emphasizes separation without separation.
We are exploring the establishment of corresponding incentive systems to strike a balance between the independence and synergy of business groups and achieve the maximum synergy of development, "said Wu Yongming.
This is different from Alibaba's initial expectations for business spinoffs. In March, Zhang Yong, then Chairman and CEO of Alibaba Group, launched the largest organizational change since its establishment.
Zhang Yong believes that making each business independent and going public can solve the problem of employees' 'fighting for who'. 'Everyone is not gathered to achieve performance, but to work together on a career.' The success of a career does not depend on performance evaluation, but on market testing. Afterwards, Alibaba was able to launch several listed companies, and after a few years, it was able to "have children and children" and split out more listed companies, "which is how the business can prosper
Now, with the completion of the handover of Alibaba's management baton, Wu Yongming has charted a new direction for Alibaba's future 10 years: technology driven internet platform business, AI driven technology business, and globalized business network.
Guided by these three major directions, Taobao Tmall adheres to the strategy of "user first" and adheres to consumption grading and pricing power; Alibaba Cloud adheres to the principle of "AI driven, public cloud priority" and develops with a dual wheel drive of AI+cloud computing; International Digital Business Group is committed to building a globally leading digital supply chain network and AI+digital retail core technology capabilities; Cainiao will increase investment in technology and accelerate the construction of a global intelligent logistics network
If the establishment of these three major directions is the core of Alibaba's "steady progress", then the launch of the first batch of strategic innovation level businesses is the key to Alibaba's "active pursuit of change".
At the financial report conference call, Wu Yongming announced the first batch of strategic innovation businesses -1688, Xianyu, DingTalk, and Quark. Alibaba has proposed to continuously invest in these four strategic level innovative businesses over a period of 3-5 years, operating as independent subsidiaries to maximize the value of these businesses.
Following Wu Yongming's strategic plan, it can be seen that after completing the "Elephant Turn", Alibaba is welcoming the future with a brand new attitude, but the time left by the market for trial and error is not much.