Alibaba Big Split

The Six Five team discusses Alibaba’s big split.

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Transcript:

Daniel Newman: Alibaba, a fairly big company, looks a little bit like Amazon overseas, is basically splitting its business into six that can all go out and get their own funding and potentially all go public on their own. You know the Alibaba cloud, they’ve got their e-commerce business, they’ve got local services, they’ve got logistics, they’ve got a digital commerce business and then they have an entertainment business. So again, Alibaba, a little bit like the global Amazon is doing something that’s going to really, I think, raise some interesting question marks on a global scale because we’ve heard a lot about Amazon and AWS… I’m not saying it, but I’m saying this could be a really interesting inflection for a huge global company.

It also shows a little bit of warming up from Beijing towards big companies again and then maybe looking at how to maximize big companies. Because it’s not about splitting six into six small, it’s about taking six and turning them into six as big as the whole Alibaba group is now. This is not a GE move. They’re not doing this because there are parts of the business that are getting crushed. I really see this as a very strategic move for the company, looking at markets, looking at how the company can then be able to inject investments into different parts of the business that are seen as valuable and allow different investors of different classes to participate in investing in Alibaba because some are more focused maybe on e-commerce businesses, some might be more focused on cloud, some may be more interested in investing in things like entertainment or logistics.

So my take, and I’m going pretty fast because I’ve hit my call time, but Pat is that this is a huge opportunity and I think they’re doing it right now because the company’s had hundreds of billions of value wiped off of its valuation during this downfall and I think a lot of companies are starting to see a run in the near future to growth. So you put all these things together and you push it forward and this makes for a really interesting opportunity for Alibaba.

Patrick Moorhead: Yeah, I view this as China continuing their attack on large tech companies in China. They want them to split up. To me, the Chinese government can better control six small units that are a publicly traded company have their own IP than actually controlling a large entity. And this is 100% about the stock price as well from an investor point of view. In fact, Alibaba’s statement said, “Hey, this is designed to unlock shareholder value and foster market competitiveness.” So China and the shareholders seem to get a benefit here.