SUMMARY

• Alibaba confirms a 7% reduction in its cloud computing workforce as it prepares the division for an initial public offering (IPO).
• The company continues to offer support to its employees amidst restructuring, providing severance packages and opportunities for internal reallocation.
• Despite a recent dip in revenue, CEO Daniel Zhang reaffirms cloud computing's integral role in Alibaba's future, underlining the importance of this strategic move.

In a significant strategic move, Alibaba, the colossal e-commerce powerhouse, has confirmed a 7% reduction in its cloud computing workforce. This decision precedes the impending initial public offering of the division, a company reorganization that carries potential seismic reverberations across the industry.

An inside source revealed to CNBC the provision of severance packages for those impacted by this transition. Alibaba is diligently implementing this workforce reduction while offering opportunities for internal reallocation, underscoring its commitment to its personnel even amidst drastic business alterations.

These developments follow Alibaba's earlier decision in March to fragment itself into six distinct entities, each operating with its own CEO and board of directors. This move embodies the company's drive towards a more streamlined, specialized, and self-sufficient operational structure.

The plans to transform its cloud computing division into a fully independent, publicly listed entity were shared last week. Alibaba has set an ambitious timeline of a year for the successful completion of this spin-off, illustrating its dedication to this strategic pivot.

Although Daniel Zhang, Alibaba's CEO, has consistently spotlighted cloud computing as an essential component of the company's growth trajectory, the division currently contributes a mere 9% of the total revenue. Its revenues have been noticeably decelerating, with the last quarter seeing a 2% drop year-on-year. This downturn has been attributed to various factors including proactive revenue structure adjustments, an altered market environment, and evolving customer composition.

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