The new leader of Alibaba and its prized cloud and artificial intelligence unit told staff that the Chinese tech giant will prioritize artificial intelligence, user experience, and promoting a younger generation of leadership. So far, the stock market has shrugged.
Eddie Wu, the CEO of Alibaba (ticker: BABA) and its cloud division, said going forward the two main strategic focuses for the company will be "user first" and "AI-driven," according to a memo to staff viewed by Barron's. The company will "recalibrate our operations around these two core strategies and reshape our business priorities," Wu told staff, adding that "over the next decade, the most significant change agent will be the disruptions brought about by AI across all sectors."
Wu's memo came during his third day as Alibaba's CEO and the first since the company said he would also be taking over as leader of its cloud division, a role that former group CEO Daniel Zhang had been poised to take. The leadership shakeup doesn't change plans to spin off the cloud and AI business to shareholders, the company has said -- and presumably neither does a group re-focus on AI.
On the face of it, the memo looks like a standard message from a fresh CEO, albeit one that highlights the importance of cloud and AI to the wider business, even though that division is set to be spun off.
While Alibaba's bread and butter remains Chinese e-commerce, cloud computing has emerged as a high-growth area for the company and the focus on AI has helped it benefit from the investor frenzy over the new technology in 2023. Reiterating the importance of AI shouldn't hurt, even if it might raise eyebrows amid a slowdown in China's economy that threatens consumer behavior at the heart of the business.
Perhaps the more notable element of Wu's memo is that the company will emphasize younger employees, promoting those born after 1985 and in the 1990s over the next four years to form the core of the business management teams.
"I firmly believe that as long as we get back to our start-up mindset, not dwell on the past and not get stuck in our old ways, Alibaba will be rewarded with enormous growth and create even greater value in the area of AI," Wu said.
The stock market's reaction has been muted, if slightly negative, toward the early days of Wu's leadership and Zhang's flight from the cloud business. Alibaba's U.S.-listed shares were down 0.46% on Tuesday after the stock tumbled 1.5% on Monday as investors digested the news of the management shakeup.
While the market doesn't seem thrilled, analysts may be more level-headed.
"The cloud business leadership change may come as a surprise to the market," analysts led by Ronald Keung at Goldman Sachs -- who rate Alibaba stock at Buy -- wrote in a note on Monday. "All said, we maintain our positive view on Alibaba's aligned leadership focus ... investors will be focused on any further clarity/updates from the new management team."
Wu's memo doesn't exactly provide the further clarity that investors wanted from Alibaba. But for a company that rarely gives forward-looking statements, it's still something.
