Alibaba has a new CEO, but it's still Jack's house

By Reuters

May 08, 2015 08:14 AM EDT

When Alibaba Group Holding Ltd's (BABA.N) eccentric founder Jack Ma stepped down as CEO two years ago, he declared "the Internet belongs to young people," and promised that most of the company's leaders born in the 1960s would soon retreat from management.

On Thursday, that transition at the e-commerce behemoth appeared complete as Ma trumpeted the appointment of a fresh chief executive, Daniel Zhang, born in 1972, as part of a broader reshuffle.

Yet as the eight-year Alibaba veteran and current chief operating officer moves into the corner office, the firm remains as much Jack Ma's company as it was when it was founded in his apartment 16 years ago.

Ma exerts an outsize influence on the company, holding the title of executive chairman and controlling a 6.26 percent stake as of end-2014, worth about $13.4 billion at Thursday's closing price of $86 a share.

"No matter who the CEO is, Jack Ma still has ultimate control of the company," said Henry Guo, an analyst at Summit Research.

If Ma is the visionary, Zhang's job will be to deliver results quickly, especially as mobile commerce explodes. The company reported on Thursday that mobile transaction value in the March quarter accounted for more than 50 percent of the total for the first time.

For his part, Zhang brings a strong reputation to the job.

He was a "key architect", the company said, of the hugely successful "Double 11" shopping festival - also known as Singles Day, the Nov. 11 event that has overtaken Black Friday in the United States as the world's largest online shopping event - and he helped get the Amazon-like Tmall platform off the ground.

"The business has to change because the market is changing. They need someone to really lead the company to adapt themselves to this environment," said Tian Hou, of T.H. Capital Research in Beijing.


In a letter to staff on Thursday, Ma praised outgoing CEO Jonathan Lu, who will become a vice chairman and focus on developing talent. "Over these two years, Jonathan has had to face immense pressure and he embraced it with tremendous courage and sacrifice. It was in these two years that Alibaba's business grew by leaps and bounds," Ma wrote.

But Lu, who was born in 1969, also presided over a slump of more than 30 percent in Alibaba's share price from its all-time high in mid-November that carved more than $70 billion off the stock's value.

The company was also blindsided by Chinese regulators in January over intellectual property piracy and illegal business on Alibaba platforms. Ma quickly smoothed things over.

A company spokeswoman said speculation that Lu might have been removed for underperforming was wrong, adding that the transition had been planned since 2012.

Zhang will take over on Sunday - exactly two years after Lu took the helm. However he fares, the public face of Alibaba will be Ma's.

"Investors, the Chinese government, CEOs and foreign heads of state courting Alibaba all beat a path to Jack's door because of the weight he, as a founder, plays in the company internally and how it is perceived, rightly or wrongly," said Duncan Clark, chairman and managing director at BDA China.

"In Jack's shadow it's hard to shine."

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