At 8 a.m. ET, Alibaba's stock had declined by 7% in pre-market trading, although the earlier decrease was less striking. The firm said that the American curb on chip exportation was making it tough for Chinese agencies to acquire essential chip goods from U.S. businesses. They voiced that an absolute detachment of Cloud Intelligence Group might not bring an expected pay-off in maximizing investor value.
Shares of Alibaba from the U.S. market decreased on Thursday as the Chinese e-commerce giant reported that they would not move forward with the total division of its cloud division as a result of restrictions from semiconductor exports in the U.S. The stocks decreased by 8% in pre-market trading at 9 am ET in the wake of the announcement, recovering from earlier declines. The shares of Alibaba have gone down by roughly 1% since the start of this year.
On Thursday, Alibaba announced that it had abandoned its plan to spin off its Cloud Intelligence Group, the corporation's cloud computing arm that rivals Amazon Web Services and Microsoft Azure, citing the recent export restrictions imposed by the U.S. government on American chip suppliers. The company stated that the export restrictions had created an "uncertainty" for the prospects of Cloud Intelligence Group and that its original plan may not result in shareholder value enhancement.Before the earnings announcement, a family trust of founder Jack Ma had sold 10 million shares of the business for $870.7 million. The decision to abandon the spin-off marks an unexpected shift in Alibaba's historic plan to reorganize into six individual business units. Additionally, the company has put on hold the listing of its Freshippo retail chain for groceries, though its Cainiao smart logistics division is still intended to be listed in Hong Kong.
Alibaba reported its Thursday earnings, the first since Eddie Wu took the helm as CEO, succeeding Daniel Zhang. Despite net income of 27.7 billion yuan ($3.8 billion), which fell short of analyst expectations, revenue was in line with expectations at 224.79 billion yuan ($31 billion), up 9% year-over-year. Chairman Joe Tsai spoke to investor concerns about the company's reorganization on the earnings call, noting that the balance sheet holds $63 billion in net cash and $27 billion in free cash flow in the last 12 months. He added that Alibaba is looking to prove that it can grow its own cloud business, rather than relying on financial engineering. Eddie Wu then discussed Alibaba's plans to review and distinguish between "core" and "non-core" businesses. The company's goal is to focus on core businesses in the long run while realizing value in the non-core ones.
Alibaba announced that it will pay its first annual cash dividend of $0.125 per ordinary share or $1 per American depositary share (ADS) at the close of business on Dec. 21, 2023. The total sum of the dividend will be around $2.5 billion, and shareholders will be paid out then in Hong Kong and New York time, respectively. The company stated that its board of directors would continually assess the dividend amount based on factors like business fundamentals and capital requirements in the future. On the earnings call Thursday, Wu said Cainiao, a division planning an IPO, had "rapid growth" and was focusing on developing a global smart logistics network, as well as expanding its cross-border e-commerce and international businesses, in a three-year plan.
Viewed as a barometer of the Chinese consumer's well-being, economists had expected a surge in China's economy upon its release from Covid-19 lockdowns last year; however, the recovery has been less pronounced than predicted, with issues such as a property crisis and other structural issues hindering growth. According to Alibaba's CEO, Tsai, while global markets may be volatile, China is heading into a more stable operating environment. Despite the economic outlook, Alibaba noted that user numbers for its Taobao and Tmall domestic online shopping sites increased year-on-year, and the 11:11 Chinese shopping holiday saw a positive year-on-year order rise.
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