An unexpected change in top leadership at a major business unit was the reason for Alibaba (NYSE: BABA) stock’s slide on Monday. The Chinese tech giant’s shares lost 1.5% of their value on the news, contrasting unfavorably with the 0.7% gain of the benchmark S&P 500 index.
The news concerned outgoing CEO Daniel Zhang. Alibaba announced on Sunday that Zhang would not remain at the company as the leader of its cloud intelligence group.
In July, Alibaba revealed via an official letter from Zhang that he would step down from his position as company CEO, but stay on as CEO of its cloud business.
The resignation, which was surprising to most Alibaba investors and observers, took effect on Sunday.
In a tersely worded press release, the tech company said that incoming company CEO Eddie Yongming Wu has also taken the reins of the cloud intelligence group. Alibaba aims to spin off this business unit into a separate, publicly traded company.
Alibaba’s cloud business is a monster entity all its own, as it is the leading provider of such services in the massive Chinese market. The spinoff is part of a broader move to restructure Alibaba’s operations, which will see the company be divided into six distinct entities. Each is to have its own CEO and board of directors.
While Zhang’s departure was a surprise, at least he’s being replaced by a known figure at Alibaba in the person of Wu. The company did not, however, make it clear whether Wu would be taking the leadership position at cloud intelligence group on a temporary or permanent basis.
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Eric Volkman has no position in any of the stocks mentioned. The Motley Fool recommends Alibaba Group. The Motley Fool has a disclosure policy.
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