Alibaba’s cloud arm is laying off 7% of its total workforce, or around 1,000 employees, as the unit prepares for a full spinoff and eventual public listing, people familiar with the matter told Nikkei Asia.
The move comes days after Alibaba Group Holding announced a full spinoff of the Cloud Intelligence Group within 12 months, after which Alibaba will not hold any stake in the company, as all of the equity that Alibaba owns in the cloud business will be returned to existing shareholders by way of a dividend.
The cloud arm has less than 20,000 staff, a person familiar with the structure of the unit told Nikkei.
“The layoff is about how the cloud arm can move forward, as we need to invest our resources in key areas to face challenges,” said one person familiar with the matter, adding that the unit has not made such big cuts to its staff in previous years, unlike other tech companies that typically trim headcounts by 5% to 10% in their worst-performing divisions.
Another person familiar with the matter told Nikkei that after Alibaba announced its historical restructuring plan of separating the e-commerce conglomerate into six main business groups, the so-called middle office — a sizable team that serves all of the company’s business units — transferred many employees to the cloud arm, which was unable to accommodate all of them.