Alibaba's shattered dreams

Hi, it’s Sarah in Hong Kong. Exactly a year ago, Alibaba Group Holding Ltd. announced one of China’s most ambitious corporate shakeups. Toda [View in browser]( [Bloomberg]( Hi, it’s Sarah in Hong Kong. Exactly a year ago, [Alibaba Group Holding Ltd.](bbg://securities/BABA%20US%20Equity) announced one of China’s most ambitious corporate shakeups. Today, the early promises of that overhaul have been shattered. But first... Three things you need to know: - Amazon is investing another $2.75 billion in [AI startup Anthropic]( - Fisker will slash EV prices by [as much as 39%]( - Visa is adding new AI-powered [fraud-prevention tools]( A year older, but how much wiser? It’s hard to overstate the failure of Alibaba’s plan to split into smaller, more nimble and more valuable companies. We were told to expect IPOs and fundraisings, the unlocking of value that was being constrained by a conglomerate penalty. Employees and investors were supposed to cash in on the listings’ windfalls, and indeed shares in Hong Kong [soared]( more than 16% on the news. Instead, this week Alibaba proposed to buy the part of logistics provider Cainiao it didn’t already own, [scrapping]( the planned public listing of the unit. Unenthused about the morose state of capital markets, Alibaba has been handing out the cash itself, including by offering its first-ever dividend (of $2.5 billion) and upsizing its share buyback program by another $25 billion. The cloud unit that was going to be a prized asset on the Hong Kong exchange is now being kept in-house, with the company pointing to difficulties caused by elevated US [export controls]( on chips to China. The public debut of grocer Freshippo is also off the immediate agenda. A year later and many billions of dollars less valuable, Alibaba appears busier with untangling its aborted strategy than developing new business and growth. The Hangzhou-based ecommerce leader has all but abandoned spinoffs in favor of combining operations to drive its core businesses of commerce and cloud. Alibaba could argue that the reversal is not entirely of its making — the sluggish Chinese economy has put a drag on valuations and Beijing’s tech crackdown has left lingering investor trauma. For the restructuring itself, analysts at the time viewed it as a good way to address the government’s concerns about the "disorderly expansion of capital" and monopolistic practices of tech giants. On the one-year anniversary of their conception, it seems that the promised potential of the Baby Babas is no more. It all began with such optimism. [Daniel Zhang](bbg://people/profile/17308882), then-chairman and chief executive officer of the group, made the surprise announcement last March that Alibaba would split its stagnating empire six ways, potentially unlocking billions of dollars in pent-up shareholder value. Analysts mused that the move could serve as a growth model for other tech peers. In May, Zhang laid out a blueprint for the split: the cloud unit would spin off within 12 months, Cainiao and Freshippo would pursue IPOs, and the international commerce business would seek external financing. Two of those are now cancelled, two are incomplete, and Zhang is no longer at Alibaba. Photographer: /Bloomberg There’s been a clearout of senior leadership, including [Trudy Dai](bbg://people/profile/15848507), who led the company’s domestic commerce business and was featured on Alibaba’s earnings call three quarters in a row after the restructuring. Co-founder Eddie Wu has taken over as CEO of the group and chief of both the cloud and commerce units. Joe Tsai stepped in as chairman and chief spokesperson for the company. Both are trusted lieutenants of the firm’s original leader, [Jack Ma](bbg://people/profile/3216495). On the surface, the back-and-forth appears chaotic. Internal reporting lines have been reconfigured and thousands have been laid off, extending a workforce reduction that’s been underway for years now. Things that fall in Alibaba’s bucket of “non-core” assets, including stakes in social media platform [Bilibili Inc.](bbg://securities/BILI%20US%20Equity) and EV maker [Xpeng Inc.](bbg://securities/XPEV%20US%20Equity), are up for sale. Investors who bet on the historic rejig are down 17%. Alibaba’s dominance in commerce is under mounting pressure from the likes of PDD Holdings Inc. and ByteDance Ltd., both domestically and abroad. [Tencent Holdings Ltd.](bbg://securities/700%20HK%20Equity) and [Huawei Technologies Co.](bbg://securities/40978Z%20CH%20Equity) are pushing to take its crown as China’s foremost cloud service and infrastructure provider. And what I hear from employees is that morale is down after the cancelled IPOs, and fast-growing startups are beginning to look like more attractive workplaces. The one incontestable cause for optimism? Alibaba’s cash pile. The company is using a chunk of it on shareholder returns and is driving cloud prices down to secure its market lead. And it’s showing some focus in the way it’s discarding peripheral businesses to focus resources on what has long been its dominant domain: selling items online. There’s still power in Alibaba’s massive scale — an advantage it will need as it plots a new course forward.—[Sarah Zheng](mailto:szheng244@bloomberg.net) The big story The US Treasury Department warned that AI is making it easier for fraudsters to carry out [more sophisticated attacks on financial firms]( in a report Wednesday. The agency is the latest to sound warnings about AI, as key financial regulators such as the Fed have also raised concerns. One to watch Mike Novogratz, Galaxy Digital founder and CEO, says Bitcoin participation is only going to increase and it will play a big role in the 2024 elections. He speaks with Ed Ludlow on Bloomberg Technology. Get fully charged Salesforce paid more than $20 million for the [face of its AI strategy: Einstein.]( DoorDash is poaching AI startup Standard AI’s talent to bolster its [voice ordering product.]( Databricks’ CEO said competition from his company fueled [a high-profile executive departure at rival Snowflake.]( Reddit tumbled after Hedgeye released a report adding it as a short idea and saying it should [trade about 50% below current levels.]( Cinven has paused a $2.2 billion sale process for [pet food manufacturer Partner in Pet Food.]( More from Bloomberg Get Bloomberg Tech weeklies in your inbox: - [Cyber Bulletin]( for coverage of the shadow world of hackers and cyber-espionage - [Game On]( for reporting on the video game business - [Power On]( for Apple scoops, consumer tech news and more - [Screentime]( for a front-row seat to the collision of Hollywood and Silicon Valley - [Soundbite]( for reporting on podcasting, the music industry and audio trends - [Q&AI]( for answers to all your questions about AI Follow Us Like getting this newsletter? 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