Alibaba to Split Into Six Groups and Explore IPOs in a Departure From Jack Ma Era

Mr. Ma, a co-founder who built Alibaba into one of the world’s biggest e-commerce companies on China’s rising affluence, was once known for his outspoken views. But since China embarked on its campaign to tame internet companies, the billionaire has largely kept a low profile and remained abroad. He returned to mainland China in recent days for the first known time in almost a year, visiting a school in the eastern city of Hangzhou where Alibaba is based.

Alibaba’s restructuring culminates a yearslong shift inside the company to make it more nimble after Mr. Ma stepped back from the company’s helm in 2019. It reverses a centralization drive he embarked upon before his departure in which he sought to bring the company’s subsidiaries and affiliates into closer alignment, part of the so-called Alibaba Economy.

The power of tech titans such as Mr. Ma and their influence over society caused unease in Beijing: Companies such as Alibaba have a grip on data of more than a billion users and investments across a range of companies in China. Beijing has in the past criticized the “disorderly expansion” of the country’s biggest internet companies.

“If you don’t change yourself, you will be defeated by the times,” Alibaba Chairman and Chief Executive

Daniel Zhang

said in a letter to employees reviewed by The Wall Street Journal. He added that Alibaba’s various businesses are facing different challenges and market conditions.

Under the restructuring, Alibaba’s various businesses will be split up into six major areas: cloud computing, Chinese e-commerce, global e-commerce, digital mapping and food delivery, logistics, and media and entertainment, the company said Tuesday.

Each business group would have its own CEO reporting to a board of directors and be fully responsible for the group’s performance. Alibaba Group is set to become a holding company overseen by Mr. Zhang.

Those business groups will be allowed to raise external capital and seek initial public offerings when they are ready, Alibaba said. Its domestic commerce business will remain a wholly owned unit of Alibaba, it added.

Mr. Ma, 58 years old, was listed as a committee member of Alibaba Partnership, a strategy-making body of senior executives, in the company’s latest annual report published last July. He held less than 5% in Alibaba Group at the time.

Mr. Zhang in February said he saw 2023 as a year of progress for Alibaba. In videotaped remarks published by Chinese business publication Yicai on Tuesday, he said the reorganization was a big step forward.

He explained the main reason to reorganize is to improve the sprawling business empire’s organizational efficiency. He said splitting the businesses would make each area more agile to better compete with rivals.

Alibaba has been weighed down by fierce competition in its bread-and-butter domestic e-commerce business in the past few years. Rivals

JD.com Inc.

and

PDD Holdings Inc.’s

Pinduoduo have continued to bite into Alibaba’s market share. In addition, short-video platforms including ByteDance Ltd.’s Douyin, the Chinese version of TikTok, and

Kuaishou Technology

increasingly pose a challenge.

Alibaba’s revenue growth in the past two quarters performed below the overall growth in China’s e-commerce sales of physical goods. Mr. Zhang has acknowledged competition and said the company would explore innovative ways to better engage with customers, such as live streaming and smart recommendations.

International commerce:

50.7

Local consumer

services: 37.6

Digital media and

entertainment: 23.2

Innovation initiatives and others: 1.7

International

commerce:

50.7

Local

consumer

services: 37.6

Digital media and entertainment: 23.2

Innovation initiatives and others: 1.7

International

commerce:

50.7

Local

consumer

services: 37.6

Digital media and entertainment: 23.2

Innovation initiatives and others: 1.7

Growth momentum of the company’s cloud business also slowed in the past year as clients tightened their belts in a sluggish economy.

Last year, Alibaba focused on cutting costs, shedding 7.5% of its workforce.

In 2021, the Journal reported that Mr. Zhang had been delegating more power to the heads of Alibaba’s various business units, which had the potential to open the way for spinoffs and independent fundraisings.

The move echoes previous sweeping reorganizations by Western tech giants such as Google, which created

Alphabet Inc.

as a holding company while separating its growing cast of businesses.

Still, the holding-company structure isn’t common for Chinese tech giants. In 2021, ByteDance reorganized its operations, formerly divided by functions, into six business units that now focus on different product lines.

Alibaba’s split comes after Mr. Ma reappeared in China and at a time when Beijing is seeking to revive entrepreneurs’ confidence following more than two years of regulatory clampdowns and Covid-19 restrictions. The announcement wasn’t related to his return, people inside the company said.

The listing status of Alibaba’s shares in New York and Hong Kong won’t be affected, people familiar with the matter said. Alibaba’s American depositary receipts climbed more than 9% in early trading on Tuesday in New York.

Beijing started to crack down on the Chinese tech sector in late 2020, calling off Ant Group Co.’s blockbuster IPOs. The cancellations came after Mr. Ma’s speech at a financial forum drew the ire of regulators by criticizing their work as anachronistic. Regulators subsequently launched a probe into Alibaba for alleged anticompetitive behavior on its e-commerce platform and later hit the company with a record $2.8 billion fine.

Regulators also slapped hefty fines on other tech giants over issues including antitrust and data-security breaches, erasing more than $1 trillion in market value from China’s largest publicly listed tech companies.

Hopes that regulatory headwinds may be easing began to build as the country’s top brass sounded more conciliatory toward private businesses. But tighter oversight has become the new normal, and in January, Chinese authorities acquired a stake in a subsidiary of Alibaba. The sudden disappearance of star investment banker

Fan Bao

recently sent shivers through China’s business community.

Like many large tech companies that are burgeoning conglomerates, Alibaba has expanded its ecosystem by offering consumers and businesses multifaceted services, from shopping and travel to payments and logistics.

Since 2020, Alibaba has been establishing subsidiaries based on business functions. Apart from the six companies, other businesses could be regrouped as similar independent entities in the future while teams such as research, data management, finance and human resources will be spread across subsidiaries, Mr. Zhang said in his letter to employees.

“This transformation will empower all our businesses to become more agile, enhance decision-making and enable faster responses to market changes,” he said.

Mr. Zhang is set to continue to lead the cloud-computing division, as the company gears up to grow its business into global markets and in the artificial-intelligence arena.

—Shen Lu contributed to this article.

Write to Raffaele Huang at raffaele.huang@wsj.com and Clarence Leong at clarence.leong@wsj.com

Corrections & Amplifications
Chinese business publication Yicai published videotaped remarks by Alibaba CEO Daniel Zhang on Tuesday. An earlier version of this article incorrectly referred to the publication as Yucai. (Corrected on March 28)