Yahoo Finance Live’s Rachelle Akuffo compares Alibaba's newly announced six-way business split to tech giant Google's own subsidiary spin-offs.
Video Transcript
SEANA SMITH: Let's check in on Alibaba. Shares soaring today-- look at that-- up just about 14%. Now, the move higher comes on plans for the company to split into six divisions. Yahoo Finance's Rachelle Akuffo is here in studio from DC. Rachelle, it's so good to have you here at the desk. So tell us just exactly what this is in store for Alibaba and the reaction that we're seeing-- clearly, lots of excitement.
RACHELLE AKUFFO: Now, this was something of a surprise. A lot of people, they saw Jack Ma reappearing, wondering what was going on. And then the very next day, we have Alibaba using this holding group strategy here, which is really a rarity in China, dividing into six business units. So these are going to be Cloud Intelligence Group, headed by existing Alibaba CEO Daniel Zhang, also the cloud and AI business-- very profitable-- and you also have the e-commerce, which also includes Taobao and Temu, for all their shopping needs.
You also have [INAUDIBLE] Smart Logistics Operations. You also have the Local Services Group-- that includes things like their food delivery service at the ground level-- and Global Digital Commerce Group-- that's their international and cross-border e-commerce-- and lastly, Digital Media and Entertainment Group. Each of those units are going to have their own CEO, also their own board of directors. But just to clarify, Zhang will still be the CEO of the holding group, but he's going to delegate operational decision-making to the heads of those six units.
Now, Zhang said the market is the best litmus test. And each business group and company can pursue independent fundraising and IPOs when they're ready. Now, in terms of how big this is, earlier, I spoke to Thomas Hayes of Great Hill Capital. He calls this a historic day for Alibaba. And great news for shareholders, who've been really waiting to unlock some of the value in the company. He said this should also help Alibaba draw less scrutiny from Chinese regulators by not being such a behemoth. You know they were a target before when they were trying to pursue an [INAUDIBLE].
DAVE BRIGGS: Yeah, cracking down on big tech. All right, some other examples of big tech doing a similar move, Rachelle?
RACHELLE AKUFFO: Well, the main name that comes to mind is, of course, Alphabet. And that's when they changed their name from Google to Alphabet back in October of 2015. Now, their business unit split into Google, what we know is the search engine. Also Android and YouTube, Innovation Lab X, where they do their R&D, its VC arms, which include Google Ventures and Capital G Management Company, and Calico, its health division, DeepMind, its AI unit, several. I think by the time it got to February of the following year, they had 11 different units there.
Now, this strategy allowed individual parts of the business to be more nimble, really test out some of these growth opportunities in the market. But of course, it has been a challenge to try and stay lean, especially post-pandemic. Google and Alphabet CEO Sundar Pichai looking to make Alphabet leaner and more productive under his simplicity sprint plan. So obviously, when you do have all these units, it is easier to try and spot where you can trim the fat. So we'll see if that ends up being the same situation for Alibaba.
DAVE BRIGGS: We just talked about Amazon. I can't help but wonder. They're in health care.
SEANA SMITH: [INAUDIBLE] here.
DAVE BRIGGS: Could they break up the entertainment? I mean, I'm not saying I'm hearing that or we're reporting that, but that would be an interesting breakup--
RACHELLE AKUFFO: They have options.
DAVE BRIGGS: --down the road.
SEANA SMITH: Yeah, they certainly have been under regulatory scrutiny, that is for sure. All right, Rachelle, thanks so much.
DAVE BRIGGS: Good to see you.
RACHELLE AKUFFO: Nice to see you guys.
SEANA SMITH: Yeah, [INAUDIBLE]. You got to come back and visit us before you go back down to DC.
RACHELLE AKUFFO: I know it.
