Alibaba scraps plan to spin off cloud biz

Alibaba Group Holding Ltd has dropped plans to spin off its cloud business and will conduct a strategic review of its existing businesses, the Chinese technology heavyweight said late on Thursday.

Industry experts said the decision indicates that the company is continuously adjusting its strategy in accordance with changes in the external environment and scaling up investments in artificial intelligence and cloud computing.

Alibaba said it will not proceed with the full spinoff of its cloud unit due to uncertainties caused by the recent expansion of US export controls on advanced computing chips, saying the restrictions have created uncertainties for the prospects of Cloud Intelligence Group.

It will, the company said, focus on developing a sustainable growth model for the unit under the fluid circumstances.

Alibaba also said that it has put on hold plans to list Freshippo, its grocery and fresh goods retail chain, as it is evaluating market conditions and other factors.

Shares of Alibaba slumped 9.96 percent to close at HK$73.25 ($9.4) on the Hong Kong stock exchange on Friday.

The move is a sharp reversal of its plans following a massive restructuring earlier this year which split the firm into six major businesses, each with the ability to raise external funding and seek its own IPO.

The company's logistics arm Cainiao applied for a Hong Kong initial public offering in September. Alibaba is also preparing for external fundraising for its international digital commerce unit.

Wu Yongming, CEO of Alibaba Group, said in an earnings call with investors that the company will continue to invest strategically in its cloud business in the long term, while emphasizing that the cloud unit will continue to operate independently.

Chen Duan, director of the Digital Economy Integration Innovation Development Center at the Central University of Finance and Economics, said Alibaba has continued to increase investment in cloud computing to foster new growth drivers.

However, the cloud unit is not an independent business segment, and needs to be integrated with specific application scenarios to empower the digital transformation of industries and create greater value, she said.

Alibaba said its total revenue stood at 224.79 billion yuan ($31 billion) during the July-September period, up 9 percent year-on-year.

Meanwhile, the family trust of Jack Ma, co-founder of Alibaba, plans to sell 10 million American Depository Shares of Alibaba for about $871 million, a filing to the US Securities and Exchange Commission showed on Thursday.

The sale will be done on Nov 21 by JC Properties Ltd and JSP Investment Ltd, which are part of the family trust, according to the regulatory filing.

Pan Helin, co-director of the Digital Economy and Financial Innovation Research Center at Zhejiang University's International Business School, said Alibaba's cloud business has become a key growth engine and pivot apart from its core e-commerce unit, but it also faces sluggish growth in revenue.