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Alibaba to separate into six parts. Take that HP and IBM, with your puny two-way splits

Cloud and AI bundled into an entity that’s free to seek its own funds or list

Chinese e-commerce giant Alibaba has decided to break itself into six smaller entities – one of which will include its hyperscale public cloud.

A Tuesday filing [PDF] revealed "a new organizational and governance structure to empower all our businesses to become more agile, enhance decision making, enable faster responses to market changes, and promote innovation to capture opportunities in their respective markets and industries."

Alibaba's blog describes the plan as "the most significant governance overhaul in the platform company's 24-year history and positions Alibaba's businesses to become more agile so as to capture market opportunities better and stimulate growth."

Sorry about that corp-speak above – we don't write it, we just quote it.

The new business with most relevance to Register readers is the Cloud Intelligence Group, which will include Alibaba's cloud, DingTalk collaboration offering, and AI efforts.

The Group will be free to raise outside capital "and potentially to seek its own IPO".

Daniel Zhang, current CEO of the united Alibaba, will lead the Cloud Intelligence Group and keep his jobs as Alibaba Group's chairman and chief executive officer.

Alibaba Cloud is already among the top three such operators by market share in South East Asia, and has expressed an ambition to do better in that region and elsewhere. The outfit already has 15 regions outside China – one more than it operates in its home market. Independence and an offshore listing could make Alibaba Cloud more palatable to customers at a time Chinse businesses are viewed with suspicion.

The other groups Alibaba will operate are:

  • Taobao Tmall Business Group, focusing on e-commerce;
  • Local Services Group that includes mapping services;
  • Global Digital Business Group that incorporates, AliExpress, and other e-commerce brands;
  • Cainiao Smart Logistics;
  • Digital Media and Entertainment Group.

All of the business units, save Taobao, will be free to appoint their own boards, seek their own funds, and contemplate listings. Alibaba will keep Taobao to itself as a wholly-owned entity.

Alibaba's blog quotes a letter Zhang sent to staff in which he wrote: "The market is the best litmus test, and each business group and company can pursue independent fundraising and IPOs when they are ready."

Of course in China the Communist Party applies its own tests about how businesses conduct their affairs. In the case of Alibaba it decided to quash the IPO of its associated financial services business Ant Group, and compel the conglomerate to undertake many "rectification" actions to address its market dominance and content carried on its platforms.

Beijing has in recent months stated it is happy it can now regulate its "platform economy" – the local term for internet giants – and has permitted leaders like Alibaba founder Jack Ma to re-enter public discourse.

Splitting into six independent businesses will mean Alibaba's potential monopoly power is diminished – an outcome Chinese regulators will not mind at all.

Investors also seem to like the plan: Alibaba shares popped by 14 percent on news of the six-way split. ®

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