Alibaba will cut 7% of its cloud computing division headcount as it prepares for its initial public offering.
The move, confirmed to CNBC by a person familiar with the matter who asked to remain anonymous because he cannot speak publicly, will see the Chinese e-commerce giant offer severance packages to affected employees. Alibaba has started notifying employees of the layoffs and is helping them move to other positions within the company if they wish, the person added.
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This comes after announcing plans in March to split the company into six business units, each with a chief executive officer and board of directors.
The company last week announced plans to completely spin off its cloud computing unit, announcing its intention to make it an independent, publicly traded company. Alibaba aims to complete the spinoff within the next 12 months.
Alibaba CEO Daniel Zhang has long considered cloud computing to be a key part of the e-commerce giant’s future, but it currently accounts for just 9% of the group’s total revenue. It’s nothing more than And earnings have slowed significantly over the last few quarters. In fact, revenue in the first quarter of this year was down 2% year over year.
Mr. Zhang said at the company’s financial results conference last week, “This is partly due to the company’s proactive move to adjust the profit structure and focus on quality growth, but it may also be the result of external changes in the market environment and customer mix. There is,” he said.
ByteDance, the owner of TikTok, has begun moving its international business out of Alibaba’s cloud, which continues to weigh on the company’s cloud business.
Still, Alibaba has made some headway in its cloud business over the past few years. It is the No. 1 company in terms of market share in China and the No. 2 company in the Asia-Pacific region. Amazon, according to the Synergy Research Group. However, at the global level, it still lags behind the giant Amazon. microsoft and Google.