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Alibaba Unveils Big Cloud Price Cuts as AI Rivalry Deepens

Alibaba Unveils Big Cloud Price Cuts as AI Rivalry Deepens

In a strategic move to regain market share and fortify its position in the fiercely competitive cloud computing sector, Alibaba Group Holding Ltd. announced substantial price cuts on its cloud services, effective from Thursday. The decision comes amidst escalating rivalry with tech giants like Tencent Holdings Ltd., as the battle for dominance in providing essential tools for training AI intensifies.

Aggressive Price Cuts Aimed at Market Expansion

Alibaba Unveils Big Cloud Price Cuts as AI Rivalry Deepens

Image Source: businesstimes.com.sg

Alibaba’s latest price reduction initiative will see cuts of up to 55% on a wide array of internet-based services, with an average reduction of 20% across more than 100 products. These services include data storage and elastic computing options, crucial for online processing power. The move marks one of Alibaba’s most aggressive efforts to outpace competitors like Tencent and Baidu Inc. in the cloud business, potentially triggering a price war in the already fiercely contested sector.

The decision to slash prices comes after Alibaba called off a spinoff and initial public offering for its cloud unit, Aliyun, surprising investors. With the cloud now under the direct control of CEO Eddie Wu, the company aims to revitalize its public cloud services, particularly targeting enterprise customers amid challenges posed by US sanctions affecting chip supplies to Chinese firms.

Emphasis on Market Accessibility and Long-Term Growth

Alibaba’s strategy is focused on attracting more enterprises and developers to leverage advanced public cloud services across various industries. By reducing the threshold of cloud services through significant price cuts, Alibaba aims to stimulate growth and accelerate the adoption of cloud technologies. This move is especially significant amidst the backdrop of the company’s efforts to reinvigorate its e-commerce, logistics, and cloud operations following regulatory scrutiny and economic turbulence.

Moreover, the price cuts are not merely short-term incentives but also include special discounts for longer-term commitments, such as five-year plans. This demonstrates Alibaba’s commitment to nurturing lasting partnerships and fostering innovation within the ecosystem. The company’s emphasis on supporting startups developing AI platforms further underscores its dedication to maintaining a competitive edge in the rapidly evolving tech landscape.

Outlook and Implications

While Alibaba’s cloud revenue surged 51% year-over-year in the nine months ended December, the full impact of these price cuts on its revenue may only materialize in the latter half of the fiscal year ending March 2025. Analysts anticipate that competitors like Tencent and Baidu may also respond to these price reductions, potentially impacting margins across the Chinese internet industry.

Alibaba’s latest move reaffirms its determination to leverage cloud services as a cornerstone of its growth strategy. By making cloud computing more accessible and affordable, the company aims to consolidate its position as a leading provider of AI-driven solutions, poised to shape the future of technology and innovation.

Alibaba to Spin Off Cainiao Logistics Unit for Hong Kong IPO

Alibaba to Spin Off Cainiao Logistics Unit for Hong Kong IPO

The Cainiao Smart logistics arm of ALIBABA Group Holding’s e-commerce behemoth will be spun off via an initial public offering (IPO) in Hong Kong, according to the company.

Alibaba to Spin Off Cainiao Logistics Unit for Hong Kong IPO
Image Source: finance.yahoo.com

Based on a filing on September 26, the Hong Kong exchange approved the business’s capacity to move through with its planned Cainiao split and IPO. According to the filing, Alibaba will continue to own over fifty percent of the unit’s stock, and Cainiao will stay a business subsidiary.

The Cainiao IPO is expected to be amongst the first of Alibaba’s divisions to list on the stock market following the tech giant’s shocking division announced earlier this year.

According to a previous report from Bloomberg News, banks such as Citigroup, Citi Securities, as well as JPMorgan Chase have been collaborating on the first-ever share sale, which has the potential to generate a minimum of one billion dollars.

With the division of the company into six primary divisions and the shift to new management under the recently recruited chief executive officer Eddie Wu, Alibaba is undergoing a historic transformation. To concentrate on Alibaba’s cloud business, his predecessor, Daniel Zhang, resigned as chair and CEO. A few months later, he too gave up both positions to lead a newly created investment fund.

In 2013, Alibaba helped establish Cainiao and used it as the foundation for its Chinese online marketplace’s delivery system.

The division entered the worldwide e-commerce market after Alibaba, managing packages for millions of retailers and brands on websites like AliExpress along with Lazada in Southeast Asia.

As per its website, Cainiao, a term in Chinese for novice or amateur, guarantees package delivery in China within 24 hours and internationally within 72 hours. It collaborates with over three thousand logistics partners to manage over 300 global routes.

Also Read: Apple to Testify It Sees No Need to Deploy Google Alternative

Alibaba unveiled its largest reorganization in its 24-year history at the end of March. It will divide its firm into six parts using a holding corporation management format, the majority of which will look into capital raises or public debuts to finance expansion.

The renovation coincided with Beijing’s attempts to promote the expansion of the private sector after two years of repression and was unveiled the day after Alibaba founder Jack Ma came back after a year overseas.

Alibaba CEO Elevates AI to Key Priority in Group Revamp Plan

Alibaba CEO Elevates AI to Key Priority in Group Revamp Plan

Alibaba Group Holding Ltd, one of China’s tech giants, is embarking on a strategic transformation that places artificial intelligence (AI) and user experience at the forefront of its priorities. 

Alibaba CEO Elevates AI to Key Priority in Group Revamp Plan
Image Source: techwireasia.com

This bold move comes as the company faces intensified competition and economic challenges in a rapidly evolving market. The newly appointed CEO, Eddie Wu, articulated his vision for the company in a memo to employees, marking a significant shift in Alibaba’s approach. Wu emphasized the need to pivot towards an “AI-first” strategy while remaining mindful of the hundreds of millions of users who contributed to the company’s immense success.

“We will recalibrate our operations around these two core strategies and reshape our business priorities,” Wu stated in his memo. This renewed focus on AI is in response to mounting competition from emerging rivals like ByteDance Ltd in the realm of social media and significant AI investments made by companies like Baidu Inc. Alibaba aims to reinforce its investments in AI-driven tech businesses, internet platforms, and its global commerce network, aligning with the broader trend of Chinese tech companies prioritizing AI.

Alibaba’s strategic shift is taking place against a backdrop of fierce competition and domestic economic challenges. The company is slowly recovering from a two-year-long tech crackdown imposed by Beijing, and the unexpected departure of former CEO Daniel Zhang, who had recently accepted the role of steering the key Cloud Intelligence Group, signals a changing landscape within the organization.

Analysts suggest that the departure of Zhang may lead to greater influence for the new leadership team, composed of Eddie Wu and group chairman Joe Tsai. Wu and Tsai, both long-time associates of co-founder Jack Ma, are taking the reins at a pivotal moment. Alibaba must not only defend its top position against competitors like JD.com Inc. but also navigate a complex plan to split into six major business units.

Among these divisions, the cloud unit is seen as a significant potential growth driver, particularly in the AI infrastructure and services sector. Alibaba is actively seeking fresh funds, with plans for a Hong Kong initial public offering of its Freshippo grocery chain temporarily on hold due to valuation concerns.

Also Read: G-20 Broadens Debate on AI Risks and Mulls Global Oversight

Alibaba’s entry into the global AI race aligns with the broader importance of AI in tech companies and national strategic objectives. While the company did not secure initial regulatory approvals for offering generative AI services in China, it has made notable strides with the integration of AI models like ChatGPT into its meeting and messaging apps.

Jeffrey Towson, a partner at TechMoat Consulting, emphasized the significance of the cloud division, stating, “Who is going to run Alibaba Cloud is now the single most important growth question for Alibaba.” The company remains committed to independently spinning off the cloud unit, which seeks to raise substantial funding, potentially involving Chinese state enterprises.

Alibaba

Alibaba says it does not expect any material impact from the $2.75 billion antitrust fine.

China’s biggest business conglomerate, Alibaba Group is not expecting any material impact in business and from merchants, said Daniel Zhang, CEO of the company. Alibaba Group was charged a fine of $2.75 billion for its powerful market dominance in the nation. The company is going through a giant turmoil and disturbance with the Chinese government since last year.

In October 2020, Alibaba Group’s founder Jack Ma openly criticized the Chinese regulatory system. And since then Alibaba Group has been put under strict scrutiny and faced antitrust charges. Alibaba Group has significantly improved the economic system of China through its growing and flourishing business, but the open criticism against the Chinese government is coming with a heavy price.

New Initiatives by Alibaba

Since the company has gone through strict investigations since last year, the regulatory authority will have a strong vigilance. Apart from paying the $2.75 billion antitrust fine, the company is introducing new measures to lower the entry barriers and business costs that are constantly faced by any existing or new merchants on its platform. High cost for new business is an obstacle that needs to be softened to get them a better start and opportunity. Zhang revealed the measures to be taken to lower business costs for merchants in an online conference.

Alibaba
Image Source: techzine.eu

Alibaba’s executives have made a statement that though the company has paid a huge amount of new antitrust fine and that new regulatory measures are to be followed by the company, it believes that the company has overall support from the government (Reuters). Joe Tsai, executive vice-chairman of Alibaba Group said that the government is affirmative of the business model of Alibaba.

The company executives further said that they don’t have any fundamental flaw with their business model as a platform company. The new measures will hopefully bring the turbulence between Alibaba group and the Chinese government into balance. But, it is also a major concern if anyone else criticizes the Chinese regulatory system has to go through the same strict scrutiny.

Shares Bounce

Alibaba’s share has been going down and lagging behind the overall emerging economy for some time in the past. Everbright Sun Hung Kai analyst Kenny Ng has said that now that Alibaba group is paying the penalty fee the uncertainty faced by Alibaba Group in the market will reduce. The antitrust fine along with the regulatory measures that are imposed on the company is expected to bring back Alibaba’s stock price and it will once again regain control in the market.

The antitrust fine that has been enforced on Alibaba Group is one of the highest ever antitrust penalties not only in China but across the globe. Along with the $2.75 billion penalties, the State Administration for Market Regulation (SAMR) has ordered the company to make thorough rectification in order to strengthen internal compliance and protect consumer rights (Reuters). Big conglomerates like Alibaba Group often face criticism both from the government and the public due to establishing a great amount of control in the market.

Another similar example is the Australian government enforcing a law that made Facebook and Google make paid deals with local media companies of Australia. On the bright side, the government is trying to support the local media companies and in the case of Alibaba, consumer rights and internal compliance.

The new measures will likely reduce the revenue growth of Alibaba as a further expansion in the market share will be restricted. Alibaba will also face reduced profit margins in order to upgrade products and services. The company has also constrained the merchants to sell through any other platforms since 2015. This violates China’s anti-monopoly law as the free circulation of goods is hindered.

Exclusivity Issues

Alibaba will be giving the penalty and along with that, it has accepted to ensure compliance and determination. Tsai has said that apart from reviewing the company’s mergers and acquisitions so far the company doesn’t expect any further investigation. He also mentioned that apart from that he doesn’t know of any other anti-monopoly related investigation.

Alibaba Seeks to Split Shares to Eight Ahead of a Reported $20B HK Listing

Alibaba, the biggest eCommerce giant from China, is all set for its IPO listing, which the company has filed in Hong Kong. The IPO may take place in Q3 this year, and it is expected that it may raise up to $20 billion, biggest in Hong Kong after 2010.

Alibaba
Image Source: yahoo.com

Reportedly, Alibaba has proposed to split its one ordinary share into eightfold, in order to raise more funds. The company’s single ordinary share stands at 4 billion, and dividing one to eight will make it $32 billion.

Alibaba will be proposing the idea at its annual general meeting to be held on July 15, in Hong Kong. Here, the investors will be asked to vote for in favour or against the proposal, as they would want to. And, if the proposal gets the winning votes, the company will carry out the spilt by July 2020.

“The Board of Directors is proposing the Share Subdivision to increase the flexibility for the Company in future capital market activities. Among other reasons, the one-to-eight share subdivision will increase the number of shares available for issuance at a lower per share price, and the Board of Directors believes that this will increase flexibility in the Company’s capital raising activities, including the issuance of new shares,” stated Alibaba in the filing,explaining the reason behind the splitting up of share.

According to the reports, the company’s board is already in favour of the proposal and just waiting for the investors to poll. The reports also suggest that Alibaba has already submitted its papers for IPO.

The company went for an IPO in 2014 in the U.S. citing the lack of flexibility, as one of the reasons to not to go for Hong Kong for the listing. It was one of the biggest IPOs and had raised $20 billion at that time. But almost two years ago Hong Kong made some relaxation in its listing rules, such that most of the Chinese companies, now, are seeking for filing IPOs in Hong Kong.

Alibaba Smashes its own Last Year’s Single’s Day Sales Record

Amazon and Flipkart broke their own previous records of sales in the past festive season sales held before Diwali. But, with the 10th annual Chinese shopping bonanza Singles’ Day, the Chinese internet business giant Alibaba group has made e-commerce history, after it generated a record $30.7 billion in only 24 hours.

Alibaba
Image Source: foshansourcing.com

The biggest sales day of China celebrated on 11/11, recorded a 1 billion sale in the first 1 minute and 25 seconds. Alibaba’s Single’s day sale aka the double 11, is the biggest e-commerce sale in the world. On the 11th of November, as soon as the sale started, at midnight, people were buying things from milk powder to iPhones on the website.

Alibaba.com is the biggest dominating e-commerce marketplace, in China, and it is also planning to expand to other countries as well. The Single’s sale is a month-long event that peaks on November 11, and this year it has surpassed its own record of last year’s sale. Last year, it had earned $24 billion in just short of 16 hours. Despite the highest sale this year, the growth rate fell from 39 per cent to 27 per cent, by the end of the day.

Almost ten years ago, the Alibaba group started the Single’s Day sale as a novelty student holiday to celebrate being single and treat themselves through retail therapy. But, in the past ten years, it has become China’s biggest shopping festive season sale. Although most of the Chinese public did not show much interest in the 2018’s Single’s Day sale, Alibaba was still able to surpass the total earnings of Black Friday and Cyber Monday sales (2017) combined.

In 2015, Jack Ma the founder of Alibaba Group had shown an interest in making the Single’s Day sale open at a global level, and also, organised the first non-Chinese Single’s Day in Russia, tiny Hong Kong and the US, last year. The sale mostly included the purchase of mobile phones, wool coats and knitted sweaters. This year, the sale was also organised in South Korea, U.S. and Japan, where the purchase of the same items has been recorded.