Tags: Alibaba | jack ma | chief executive | earnings

Alibaba Replaces CEO as Mobile Gains Help Revenue Top Estimates

Thursday, 07 May 2015 09:23 AM

Alibaba Group Holding Ltd. named a new chief executive officer nine months after a record initial public offering as China’s biggest e-commerce operator posted a 45 percent increase in revenue.

Daniel Zhang will become CEO on May 10, replacing Jonathan Lu, who will remain on the board as vice chairman, the company said Thursday. The change was announced as Alibaba’s sales rose to 17.4 billion yuan ($2.8 billion) in the three months ended March, beating analyst estimates. The stock surged pre-market.

Alibaba’s market value had plunged as much as $90 billion from a November peak amid concern about slowing economic growth and criticism from the Chinese government about its business practices. Billionaire Chairman Jack Ma elevated Zhang after the chief operating officer helped turn the Nov. 11 “Singles’ Day” shopping promotion into the company’s biggest sales day.

“Perhaps Jack is sending a signal to the capital markets and the regulator that he’s willing to make changes,” said Mike Clendenin, managing director of RedTech Advisors.

Shares of Alibaba climbed 11 percent in premarket trading after closing at $80 in New York on Wednesday. The stock had slumped 23 percent this year as of Wednesday’s close. Shares in the September IPO were sold at $68 apiece, raising a record $25 billion.

Earnings Fall

“Daniel is a proven international business leader and innovator with a strong track record of delivering results,” Ma said in the statement. “Today’s announcement reflects our commitment to continuing to develop strong leadership from within.”

Net income fell 49 percent to 2.9 billion yuan, the company said.

Zhang first joined Alibaba as chief financial officer of Taobao Marketplace in August 2007 and has been COO since since September 2013. The change is being made because Alibaba wants to promote young talent, Executive Vice Chairman Joseph Tsai said on a conference call.

Lu has been CEO for the past two years, when he replaced Ma in the role, after joining Alibaba in 2000.

Alibaba is trying to diversify its businesses while simultaneously tapping more of the 557 million Chinese who access the Internet from their smartphones and tablets. Alibaba announced at least $2.4 billion in investments the past 12 months, including a Chinese soccer team, smartphone maker and mobile application for hailing taxis.

China Dependence

The company’s overseas strategy has seen it start e- commerce sales in Russia, Brazil and India through its AliExpress service.

Ma has set a goal of getting 50 percent of sales from outside China as it expands beyond the country’s urban areas.

China accounted for 80 percent of revenue in the March quarter, rising 39 percent from a year earlier. International sales were just 9 percent of the company’s total, Alibaba said.

As it deals with the slowing Chinese economy, Alibaba has also been battling criticism from the government. In January, a report by the State Administration for Industry & Commerce accused Alibaba of allowing merchants to operate without required business licenses, to run unauthorized stores that co- opt famous brands and to sell fake wine and handbags.

“Internally Jack Ma may think Jonathan wasn’t being aggressive enough with regard to fakes and maybe Daniel will be more aggressive,” Clendenin said.

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Alibaba Group Holding Ltd. named a new chief executive officer nine months after a record initial public offering as China's biggest e-commerce operator posted a 45 percent increase in revenue.
Alibaba, jack ma, chief executive, earnings
Thursday, 07 May 2015 09:23 AM
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