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Alibaba scraps cloud business spin-off citing US chip export ban

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Alibaba scraps cloud business spin-off citing US chip export ban
  • Alibaba says US chip curbs have created uncertainties
  • Also pauses Freshippo IPO
  • Starts external fundraising for overseas digital commerce arm
  • CEO lays out future development strategy
  • Reports Q2 revenue in line with analysts’ estimates

Nov 16 (Reuters) – Alibaba Group (9988.HK), has scrapped plans to spin-off its cloud business, citing uncertainties created by U.S. export curbs on chips used in artificial intelligence applications.

The U.S. decision last month to ban the export to China of more chips used in artificial intelligence (AI) has created major uncertainties for the country’s big tech companies.

Tencent Holdings (0700.HK) said on Wednesday it saw the curbs impacting its cloud services.

Thursday’s announcement came alongside in-line second-quarter revenue from the Chinese e-commerce group, which in March had unveiled plans to carve out the cloud business as part of the biggest restructuring in its 24-year history.

The company also put on hold plans for an initial public offering of its Freshippo groceries business but said it would prepare external fundraising for its international digital commerce group arm.

Alibaba’s logistics division, Cainiao applied to list in Hong Kong in September.

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Alibaba’s U.S.-listed shares were down 8.5% at market open.

“The market does not like surprises,” Thomas Hayes, chairman at hedge fund Great Hill Capital said on the X social media platform.

“Investors had hoped to receive separate shares of the cloud business in hopes the segment could achieve a higher multiple in the public markets due to its growth potential.”

Analysts had in March estimated the cloud division could be worth between $41-60 billion but had warned that its listing could attract scrutiny from both Chinese and overseas regulators due to the reams of data it manages.

In September, Alibaba’s former group CEO Daniel Zhang abruptly quit just two months after concentrating his focus on cloud computing.

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The company then appointed Eddie Wu, one of Alibaba Group’s co-founders and long-time lieutenant of former chief Jack Ma, as both CEO of Alibaba and the cloud business. Zhang also handed the group chairmanship to another co-founder, Joseph Tsai.

“Alibaba will not pursue a full spin-off of Cloud Intelligence Group in light of uncertainties created by recent U.S. export restrictions on advanced computing chips,” Tsai told analysts on a post-earnings call.

Instead the group would focus on growing the cloud business and providing investment for its AI drivers, he said.

The cloud unit will continue to maintain its independent operation, Wu added.

Regulatory filings also revealed on Thursday that Ma’s family trust plans to sell 10 million American Depository Shares of Alibaba Group Holdings for about $871 million.

DEVELOPMENT STRATEGY

Wu, presenting Alibaba’s earnings for the first time on the call, also detailed its future strategy, saying that each of its businesses would face the market more independently and that they would conduct a strategic review to distinguish between “core” and “non-core” businesses.

“Core businesses are where we will keep our long-term focus, intensively invest resources, pursue R&D, enhance user experience,” he said. The Alibaba restructuring broke it up into six units, managed by the group as a holding firm.

“As for the non-core businesses, we will realise the value of these assets by turning them profitable as soon as possible or through other means of capitalisation.”

They will also invest in and incubate innovative businesses for the future, he added, naming four units, including work communication and collaboration platform DingTalk and second-hand goods platform Xianyu as ones that will be allowed to operate as independent subsidiaries.

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In September, he told staff that the tech giant’s two main strategic focuses going forward will be “user first” and “AI-driven”.

EARNINGS IN LINE

Alibaba reported second-quarter revenue of 224.79 billion yuan ($31.01 billion), in line with the 224.32 billion expected by analysts, LSEG data showed.

China’s economic recovery has been uneven. While the industrial and the retail sectors have performed better than expected, the crisis-hit property sector has weighed on consumer confidence.

Customer management revenue from Alibaba’s commerce retail, which tracks how much money merchants provide Alibaba for placements and promotions, grew 3% year-on-year.

Alibaba asked merchants to price aggressively during the country’s Singles Day festival taking on competitors such as Douyin and PDD Holdings’ (PDD.O) Pinduoduo which have been selling lower-cost products year-round.

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Alibaba International Digital Commerce, a business that includes platforms such as Lazada and AliExpress, however reported a 53% rise in revenues, with retail revenue up 73% year-on-year. Analysts had predicted that strong international growth might help Alibaba offset a tepid domestic market.

The cross-border platform environment has become more intensely competitive with the emergence of PDD Holdings-owned (PDD.O) Temu.

($1 = 7.2481 Chinese yuan renminbi)

Reporting by Akash Sriram in Bengaluru and Casey Hall in Shanghai; Writing by Brenda Goh; Editing by Sam Holmes, Arun Koyyur and Jane Merriman

Our Standards: The Thomson Reuters Trust Principles.

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Casey has reported on China’s consumer culture from her base in Shanghai for more than a decade, covering what Chinese consumers are buying, and the broader social and economic trends driving those consumption trends. The Australian-born journalist has lived in China since 2007.

Akash reports on technology companies in the United States, electric vehicle companies, and the space industry. His reporting usually appears in the Autos & Transportation and Technology sections. He has a postgraduate degree in Conflict, Development, and Security from the University of Leeds. Akash’s interests include music, football (soccer), and Formula 1.

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Ireland to begin sending asylum seekers back to the UK 'by end of May'

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Ireland to begin sending asylum seekers back to the UK 'by end of May'

British Prime Minister Rishi Sunak say the increase in migrant numbers crossing over to Ireland proves that his controversial Rwanda policy is working.

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The Irish government has said it is planning to enact legislation by the end of May that would allow it to resume sending asylum seekers who arrive over the border with Northern Ireland back to the United Kingdom.

Justice Minister Helen McEntee said the emergency legislation would allow for faster processing of migrants.

“This has never been a panacea when we talk about returns, the most effective way that we can have an immigration system that’s firm but fair is a fast processing system and what this means is that people’s applications are turned around much more quickly,” she said.

Ireland’s High Court ruled last month that Ireland could not send back people who arrive from the UK seeking asylum because the Irish government had not specified whether they would be at risk after their return.

Taoiseach Simon Harris said the legislation is about giving practical legal meaning to an agreement in place between the UK and Ireland since 2020.

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Harris has urged Westminster to stand by the agreement, which allows asylum seekers to be returned in either direction.

Helen McEntee said that Ireland hadn’t returned anyone to the UK since 2020 as the agreement had been suspended during the coronavirus pandemic.

Immigration is an increasingly hot topic in Ireland, where asylum applications have been rising sharply.

British Prime Minister Rishi Sunak claims that the increase in migrants crossing over to Ireland proves that his controversial Rwanda policy, which aims to send some asylum seekers arriving in Britain on a one-way trip to the African country, is working.

Human rights activists and migrants’ groups call the policy unethical, inhumane and costly.

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Irish officials estimate that more than 80% of arrivals into Ireland came via the land border with Northern Ireland, which is part of the UK.

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Good Morning America Meteorologist Rob Marciano Out at ABC News

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Good Morning America Meteorologist Rob Marciano Out at ABC News


Rob Marciano Out at ABC News: Meteorologist Leaves Network



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Arrest warrant issued for Central African Republic's former president over human rights abuses

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Arrest warrant issued for Central African Republic's former president over human rights abuses

An internationally backed court in the Central African Republic issued an international arrest warrant Tuesday for the country’s exiled former President François Bozizé for human rights abuses from 2009 to 2013, a spokesperson said.

The Special Criminal Court was set up in the capital, Bangui, to try war crimes and other human rights abuses committed during the coups and violence that the country has experienced since 2003.

CENTRAL AFRICAN REPUBLIC REPORTS 10,000 CHILDREN STILL FIGHTING WITH MILITANT GROUPS

Court spokesperson Gervais Bodagy Laoulé said the warrant was for crimes committed under Bozizé’s leadership in a civilian prison and at a military training center in the city of Bossembélém where many people were tortured and killed.

A spokesperson for an internationally backed court in the Central African Republic says the panel has issued an international arrest warrant for exiled former President François Bozizé for human rights abuses. (SIMON MAINA/AFP via Getty Images)

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The warrant covers crimes from 2009 to 2013 by the presidential guard and other security forces, Laoulé said.

Bozizé current lives in exile in Guinea-Bissau, where that country’s President Umaro Sissoco Embaló told the Associated Press that he had not received any request from Bangui about the arrest warrant, and that the country’s laws do not allow for extradition.

Ibrahim Nour, whose father was tortured and killed in the infamous Bossembélé prison, welcomed the arrest warrant.

“Justice may be slow, but it will eventually catch up with the executioners. That’s why I welcome the arrest warrant for the men who killed my father, and for whom we are waiting for explanations so that we can begin to mourn,” Nour said.

The court was created in 2015, but took several years to begin operating. Human Rights Watch has described its creation as a landmark to advance justice for victims of serious crimes.

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Patryk Labuda, an expert in international criminal law at the Polish Academy of Sciences, told the AP that the warrant issued Tuesday sends a message about the court’s intention to prosecute wrongdoing by the state.

“This arrest warrant is certainly one of the most high profile developments in the 5 years the court has operated,” Labuda said.

Bozizé seized power in a coup in 2003, and was ousted by predominantly Muslim Seleka rebels a decade later. That led to a civil war between the rebels and mostly Christian militias marked by sectarian violence atrocities and the forced use of child soliders.

Both the U.S. and the United Nations targeted Bozizé with sanctions for fueling the violence.

The U.N., which has a peacekeeping mission in the country, estimates the fighting has killed thousands and displaced over a million people, or one-fifth of the population. In 2019, a peace deal was reached between the government and 14 armed groups, but fighting continues.

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About 10,000 children are still fighting alongside armed groups in Central African Republic more than a decade after civil war broke out, the government said earlier this year.

“It’s a great day for us victims to learn that François Bozizé is the target of an international arrest warrant,” said Audrey Yamalé, a member of the Association of Victims of the 2013 Crisis. “But let’s not stop there. We would like Guinea Bissau to cooperate in his extradition.”

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