| From: Glenn Petersen | 8/11/2023 9:49:07 AM | | | | | | Alibaba Takes a Step Toward Comeback as Growth Finally Returns
-- Core e-commerce returned to growth for first time in a year
-- Alibaba is trying to revive its business in a volatile economy
By Jane Zhang and Sarah Zheng
Bloomberg
August 10, 2023 at 10:06 AM UTC
Updated on August 10, 2023 at 1:27 PM UTC
Alibaba Group Holding Ltd. returned to growth across all its main divisions, defying China’s economic turbulence to take a first step toward a long-awaited comeback after more than a year of malaise.
China’s online shopping leader, a proxy for the country’s consumer demand, reported a better-than-expected 14% rise in revenue during a quarter when the world’s No. 2 economy struggled to gain momentum after years of Covid Zero restrictions. Its shares jumped more than 3% in pre-market trading.
The strong showing marks a step toward the revival of a national icon grappling with a post-Covid consumption funk, up-and-comers like PDD Holdings Inc. and the lingering effects of China’s blistering crackdown on the private sector. Alibaba drove that expansion while cutting costs 6%, helped in part by a 3% reduction in its workforce or more than 6,500 people.
Alibaba, which along with Tencent Holdings Ltd. and Baidu Inc. is credited for creating China’s internet industry, now needs to win over investors to effect a complicated overhaul that will split the company six ways.
For now, the results provide a solid foundation for Alibaba co-founders Joseph Tsai and Eddie Wu as they take over leadership of the company from Daniel Zhang in September. Alibaba’s cloud division reversed its decline in the quarter and the overseas arm that includes Singapore-based Lazada and Trendyol expanded revenue 41%. Its core domestic commerce division — which now excludes certain marginal segments — chalked up its first sales rise in more than a year.
“We view the solid revenues and profit beat delivered in FY1Q24 as what the Street has been waiting for,” Citigroup analysts led by Alicia Yap wrote. “Most investors had expected an OK quarter, but the magnitude of the outperformance, especially on the profit beat, likely has exceeded most expectations.”
Alibaba reported revenue of 234.16 billion yuan ($32.3 billion) for the June quarter versus an average projection of 223.75 billion yuan. Net income rose about 50% to 34.3 billion yuan, also beating estimates.
Investors are waiting for more details on the spinoffs, including grocery arm Freshippo, the AWS-like cloud business and Cainiao logistics. In the June quarter, the cloud business returned to growth with revenue inching up 4%, while Chinese retail e-commerce revenue surged 13%.
The numbers “showed promising early results of our reorganization, which is beginning to unleash new energy across our businesses,” Zhang, who officially steps down next month, told analysts on a conference call.
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What Bloomberg Intelligence Says
Alibaba’s proposed listing of nearly $60 billion of assets through 2024 could give the group resources to step up its competitive efforts in China’s grocery retailing, cloud-AI and logistics sectors. Freshippo might use proceeds from an IPO valuing it at $4 billion to chase Walmart’s lead in grocery e-commerce sales. After an IPO that could value it at $45 billion, Alibaba’s cloud unit might scale up with support from new strategic investors to tackle Tencent, Huawei and China Telecom. An IPO of Cainiao, perhaps valued at $10billion, could accelerate the logistics unit’s expansion in China and overseas.
- Catherine Lim and Trini Tan, analysts
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China’s largest tech companies Alibaba and Tencent Holdings Ltd. have gained some $70 billion of market value since May’s end, propelled by expectations of a gradual return to the consistent double-digit growth they enjoyed before Beijing launched a regulatory assault against its biggest private companies in 2020.
Driven by a need to rejuvenate the world’s No. 2 economy, Xi Jinping has in recent months led Party cadres and state media in proclaiming Beijing’s support for a sector wracked by two years of unpredictable diktats. In July, Beijing signaled it’s ready to unfetter the sector when it wrapped up a probe into Jack Ma-backed Ant Group Co.
Yet some investors warn the celebration may be premature.
Chinese policymakers have stopped short of providing direct, major fiscal or policy support for businesses, and consumer spending remains muted thanks to a subdued outlook for wages and record-high youth unemployment. Profit margins remain under pressure amid rising competition from upstarts that mostly escaped the brunt of the crackdown such as ByteDance Ltd. and PDD.
Alibaba and Tencent cut more than 20,000 jobs between them last year to survive regulatory and economic turmoil. They face a two-pronged assault: rivals like Baidu Inc. and Meituan are vying for dominance of the Internet thanks to the emergence of generative AI. Baidu has so far stolen much of their limelight in the post-ChatGPT race, debuting Ernie in March before launching into several iterations.
Abroad, ByteDance and PDD’s Temu continue to make strides, building on expansions that began when Alibaba and Tencent were forced to show restraint. During the crackdown, companies including ByteDance’s TikTok and Temu revved up overseas forays for growth. Despite rising geopolitical tensions, this generation of upstarts offer a template for older peers seeking to regain pre-crackdown heights.
“There’s uncertainties ahead of us on this road,” Taobao and Tmall chief Trudy Dai said. “But I think faced with all these uncertainties and potential volatility, the greatest certainty we have is the need to continue to grow our user scale and our merchant scale.”
— With Debby Wu, Vlad Savov, and Henry Ren
Alibaba Takes a Step Toward Comeback as Growth Finally Returns - Bloomberg (archive.ph) |
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| From: Glenn Petersen | 9/11/2023 10:51:22 AM | | | | | | The Alibaba Spinoff Trade Loses More Steam
Recent hiccups probably won’t derail the firm’s restructuring, but the stock could struggle without further concrete signs of progress
By Jacky Wong
Heard on the Street
Wall Street Journal
Sept. 11, 2023 9:27 am ET
An unexpected twist to Alibaba’s changing of the guard—and a drip feed of other bad news—has undermined the bullish sentiment surrounding the Chinese e-commerce giant earlier this year.
And given how China-adverse investors have become, it may be tough to reverse that without an all-clear for the economy more broadly—especially since Alibaba executives may be tempted to slow-walk restructuring plans as long as China’s stock markets remain in the doldrums.
Alibaba’s Hong Kong-listed shares fell 3% Monday in the wake of two potentially significant developments: a report from Bloomberg, citing sources, that the firm would put on hold a potential IPO of its Freshippo grocery chain, and a surprise personnel change. Alibaba declined to comment on the Bloomberg report.
Alibaba’s leadership reshuffle, which became official Sunday, is no surprise: It has been telegraphed for months. Daniel Zhang formally stepped down as Alibaba’s chairman and chief executive officer, succeeded by Brooklyn Nets owner Joe Tsai and Eddie Wu, respectively.
What was unexpected was that Zhang also resigned from his separate roles as chairman and chief executive of Alibaba’s cloud business. Zhang had, as recently as June, framed his plan to resign as Alibaba chief as a means to focus squarely on the cloud business. Instead Wu, the incoming Alibaba CEO, will take over Zhang’s roles at the cloud unit too.
The knee-jerk share-price reaction reveals investors’ renewed uncertainty regarding the progress of the e-commerce giant’s restructuring plan—particularly the spinoff of its valuable cloud unit. Alibaba announced in March that it planned to split itself into six units and explore IPOs: a declaration which quickly lighted a fire under the company’s stock. The firm said it planned to fully spin off its cloud unit and distribute shares to Alibaba investors by May 2024.
Apart from its core e-commerce business, Alibaba’s cloud unit is probably its most valuable. But lately it has faced serious challenges from competitors such as Huawei and state-owned telecom companies. Losing the international business of Bytedance, TikTok’s owner, was another blow. Revenue at Alibaba’s cloud unit grew only 4% year over year in the June quarter—the slowest pace among its major segments.
The leadership tweak probably won’t derail the restructuring, which is increasingly the driver for the stock. But it also comes as persistent gloom in the Chinese economy is also clouding the company’s prospects—and driving investors away from the country’s stocks more generally.
Alibaba’s shares are up only 2% this year. Almost all of the stock’s gains in March following the restructuring announcement have been wiped out, although it is still handily outperforming the larger Hong Kong index. And that is despite the fact that Alibaba’s business actually recovered nicely last quarter. Its revenue increased 14% year over year—the first double-digit growth since 2021.
The bearish sentiment on Chinese assets could also affect how much the market is willing to pay for Alibaba’s separate businesses—not only for the cloud unit but also, potentially, for smaller ventures like its bricks-and-mortar retail business Freshippo.
In such an environment—and given that Alibaba is still easily beating the Hong Kong market this year—it is no surprise that any hints of potential turbulence, however small, can morph into big air pockets.
Write to Jacky Wong at jacky.wong@wsj.com
The Alibaba Spinoff Trade Loses More Steam - WSJ (archive.ph) |
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| From: Glenn Petersen | 11/17/2023 6:16:26 AM | | | | | | Alibaba Is Worth About Half of Tencent as Demand Recovery Lags- Companies’ values widen after Alibaba cloud announcement
- Alibaba now trades at eight times forward earnings multiples
By Charlotte Yang
Bloomberg
November 17, 2023 at 4:25 AM UTC
Alibaba Group Holding Ltd.’s market value has slumped to only about half that of rival Tencent Holdings Ltd. as the former’s e-commerce-centric business faces sluggish demand and intensified competition.
Alibaba, whose other main business line includes cloud computing, has a market capitalization of $201 billion, while Tencent, focused on social media and gaming, boasts $391 billion, according to data compiled by Bloomberg. Alibaba’s shares now trade around eight times forward earnings multiples, about half of Tencent’s 16 times.
Alibaba Friday abruptly ended its plan to spin off the cloud unit, citing heightened US restrictions on chip sales to China. The announcement, along with lower-than-expected domestic e-commerce sales in the September quarter, sent the stock tumbling about 10% in Hong Kong, its sharpest drop this year.
The companies’ value divergence points to other regulatory and macroeconomic issues that have troubled Alibaba. In recent years, China has sought to rein in the country’s tech giants, with regulators probing Alibaba affiliate Ant Group Co. and imposing a $1 billion fine on the fintech company backed by Jack Ma. Its market value had largely been higher than Tencent before China’s crackdown started in late 2020.
“China’s tepid consumption recovery and the heightened competition in the e-commerce space all make it harder for Alibaba’s business environment,” said Willer Chen, a senior analyst at Forsyth Barr Asia Ltd. “There were also greater regulatory concerns for Alibaba earlier that weighed on investors sentiment.”
Alibaba Is Worth About Half of Tencent as Demand Recovery Lags - Bloomberg (archive.ph) |
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| From: Sr K | 12/20/2023 12:42:30 PM | | | | | | Alibaba CEO Takes Direct Control of Domestic E-Commerce Businesses
Leadership shake up is latest amid the e-shopping titan’s struggles with new competition
By
Sherry Qin
Updated Dec. 20, 2023 6:02 am ET
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Alibaba’s Eddie Yongming Wu is seen in this undated handout photo provided by Alibaba Group. PHOTO: ALIBABA GROUP/VIA REUTERS
Alibaba Group Chief Executive Eddie Wu will take direct control of the company’s domestic e-commerce arm, the latest management shuffle at the e-commerce giant as it struggles with new competition from the likes of PDD Holdings in its home market.
Alibaba said Wednesday that its board has approved Wu’s appointment as chief executive of Taobao and Tmall Group, the company’s domestic e-commerce business, effective immediately, according to an exchange filing.
Exc. |
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| From: Glenn Petersen | 1/7/2024 4:18:36 PM | | | | | | Alibaba was once a Wall Street darling. After plunging 75% over three years, what’s next?
PUBLISHED WED, JAN 3 202410:58 PM EST
UPDATED THU, JAN 4 20249:23 AM EST
Evelyn Cheng @CHENGEVELYN
Arjun Kharpal @ARJUNKHARPAL
CNBC.com
KEY POINTS
- Scrapped cloud IPO plans and a management shake-up in the last year reflect bigger problems for a company that has served as a bellwether for foreign investors in China.
- The stock has plunged to below $77, down from more than $300 a share in 2020.
Signage for Alibaba Group Holding Ltd. covers the front facade of the New York Stock Exchange November 11, 2015.
Brendan McDermid | Reuters
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BEIJING — It’s been a tumultuous 12 months for Alibaba, casting doubt on the future of the tech giant just as artificial intelligence is taking off.
The company’s cloud computing unit was poised to capture AI’s growth for investors in a public listing, until Alibaba pulled those plans in November. The group’s U.S. market value fell below that of e-commerce rival PDD, signaling struggles in the industry that had propelled Alibaba onto the global stage with the world’s largest IPO in 2014.
On the political front, Alibaba was a poster child for China’s crackdown on internet tech companies — receiving a record fine of $2.8 billion for alleged monopolistic behavior in 2021. Slowing economic growth hasn’t helped its business either.
But the scrapped cloud IPO plans and management shake-up in the last year reflect bigger problems for a company that has served as a bellwether for foreign investors in China. Alibaba’s stock has plunged to below $77 a share, down by 75% from more than $300 in 2020.
“I think there are some deep internal issues. And so there must now be ... a clear internal fight between how they’re going to get out of this because they’re really slipping,” said Duncan Clark, an early advisor to Alibaba and now chairman of Beijing-based investment advisor BDA.
“The core to me is their eroding market position, what they are doing in terms of video, livestream and how they respond to Douyin, plus how they manage all these disparate groups and all the management turmoil,” Clark said. ”It’s a mess basically.”
Douyin, the domestic Chinese version of ByteDance’s TikTok, has taken off in China as a platform for the surging livestream sales industry. Chinese consumers, who are increasingly hunting for bargains, have also turned to bargain hunting on Pinduoduo.
Founded in 1999 by Jack Ma, Alibaba is a far older company than ByteDance or PDD.
“Personnel-wise there are people that are leaving the company, they may feel the company is so big and bureaucratic, that is a reality,” said Brian Wong, former Alibaba Group vice president and author of “The Tao of Alibaba,” published in November 2022.
Management shake-up centered on cloud
Plans for the now-scrapped cloud initial public offering emerged after Alibaba Group announced a massive corporate structure overhaul in March, followed by several cloud-related management changes.
Eddie Wu became CEO of Alibaba in September, and is also acting head of the cloud business. He succeeded Trudy Dai as head of the Taobao and Tmall e-commerce business in December.
Are they too big? That was the charge from the government before, but now the question is are they nimble enough, are they able to compete enough in the marketplace?
Daniel Zhang, the prior CEO of Alibaba Group who became acting head of cloud in December 2022, was supposed to stay on to lead the business unit but unexpectedly quit in September last year.
Zhang’s departure “speaks to some mismanagement on the cloud side, which is very important because they were dangling that as the symbol really of their restructuring,” Clark said.
The canceled cloud IPO plans — like the abrupt suspension of Alibaba-affiliate Ant Group’s IPO in 2020 — means employees won’t be able to cash out on lucrative shares.
“The whole mechanism of incentives is broken down,” Clark said.
“Are they too big? That was the charge from the government before, but now the question is are they nimble enough, are they able to compete enough in the marketplace?” he said. Clark also wrote “Alibaba: The House That Jack Ma Built,” published in 2016.
Cloud competition from Huawei
Alibaba has been an industry leader in the cloud business.
The company remained the largest player in China’s cloud market in the third quarter, followed by Huawei and Tencent, according to Canalys.
But the research firm predicted that Huawei’s market share will gradually increase, said analyst Yi Zhang.
She pointed out the telecommunications company started in 2022 to focus on improving its engagement with business partners — via a strategy of developing an ecosystem of experts and developers. In contrast, she said Alibaba’s and Tencent’s cloud units only started pursuing a similar strategy in 2023.
Such an approach can pay off in a slowing cloud services market that Canalys said is “relying heavily on government and state-owned enterprises to drive growth.”
Chinese business news site 36Kr reported in January last year, citing sources, that government customers closed cloud deals with Huawei, after almost buying from Alibaba.
Alibaba and Huawei did not respond to a request for comment on this story. Alibaba in November blamed U.S. restrictions on chip sales to China for the decision to pull the cloud IPO.
Alibaba said its cloud business revenue grew by just 2% year on year in the quarter ended Sept. 30. Since the quarter ended June, the company has included cloud revenue from business with other parts of Alibaba Group.
BDA’s Clark said his firm’s research found that Alibaba tried to grow its cloud business by taking away big clients from third-party resellers. Those resellers were other companies that had acted as distributors or agents for Alibaba cloud and received commissions.
“It may be like a botched go-to-market strategy, or reseller strategy, because a lot of those resellers ... became very upset and some of them are now going to work with other players,” Clark said. “They were supposed to be able to focus on smaller companies rather than the big ones that were taken away but that didn’t materialize. It’s a very tough market.“
Global IPO market slump
Alibaba still plans to list its Cainiao logistics business, and its Freshippo grocery store chain. But it’s been a tough IPO market, especially for Chinese companies wanting to list overseas.
The Information reported in November, citing sources, that an international investment firm was only willing to value Alibaba’s cloud unit at less than $25 billion, far below the $40 billion the company had wanted.
Alibaba “has a massive base to work from in terms of customers and data, and that is a treasure trove of any AI operation. They still have some amazing minds in the organization,” former executive Wong said.
“I think all the raw materials are there, it’s question of how do they [execute] this in a time of a critical moment,” he said, noting that to him, Alibaba is “getting its house in order to prepare for the next big thing.”
Alibaba was once a Wall Street darling. What's next? (cnbc.com) |
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| To: Glenn Petersen who wrote (875) | 1/16/2024 8:17:55 AM | | From: Sun Tzu | | | | The key issue, at least for me, is structural securities reform in China. Assume BABA or any Chinese stock trades at a huge discount to it cash flow.
Say BABA drops to $10 with material change to its business. What exactly will you be getting for that $10? You cannot take over the company. You cannot change the board or the management. The company is under no obligation to pay dividend or buy back the stock. So for all practical purposes, you are powerless and are hitching a ride based on hope.
Hopium worked when the consensus view was that China is on its way to be a market economy and will keep operating up. This is no longer the perspective. I understand that the authorities have recently indicated they will reform the rules for greater clarity and will also allow bigger and better foreign ownership. And this is the right medicine. But the fact that they had to suffer a lot before they came to this point means they are not genuine. So they will have to prove themselves first. Which will be hard to do while Xi is still in power. |
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| From: Julius Wong | 1/23/2024 8:37:06 AM | | | | | | Jack Ma Doubles Down on Alibaba
China’s most famous entrepreneur has been out of the spotlight after clashing with officials. But in recent months, he has been buying shares in the tech giant he co-founded as its stock has plunged. |
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