On Thursday, a new chief executive officer was named by Alibaba Group Holding Ltd as the blistering growth faces headwinds and the mobile transactions of the Chinese ecommerce group, which may be less-lucrative, surpassed those from personal computers for the very first time. The company announced that on May 10th, Daniel Zhang would replace the low-key chief executive of the firm, Jonathan Lu, who had most often been eclipsed by the outspoken Executive Chairman and founder Jack Ma. However, the group did announce that the ex-CEO would still hold the position of vice chairman of the board.
There was a 45% jump in the quarterly revenue of Alibaba, which rose to $2.81 billion and beat the average analyst estimate that had been around $2.7 billion. The rise in the quarterly profit shot up the share price of the company to $88 in the open market, which indicates a 9.8% increase. This is the highest level their stock has reached in the past two months. According to analysts, this turned out to be an extremely good quarter for the company, especially considering the fact that not a lot of people had expected the results to be this strong. They asserted that the tide would be favorable for the company.
The helm of the company will be taken by Zhang as the sprawling e-commerce firm places greater emphasis on using mobile devices in China, which is the largest smartphone market of the world, for reaching customers. The reason for the change in leadership was not explained by the firm, but Jack Ma, the Executive Chairman, stated in a letter sent to staff that he was pleased to give the reigns to a reader who had been born in the 1970s. According to Chinese media, Zhan was born in the year 1972 while the birthdate of his predecessor mentions the year 1969.
Even though the company had a strong fourth quarter, the incoming CEO may still have to deal with slowing growth as saturation in online shoppers is a threat to expansion, along with tough competition from local rivals such as Tencent Holding Ltd, JD.com Inc. and Baidu Inc. on mobile. The total value of the transactions that are made on the platforms of Alibaba, also called the gross merchandise volume (GMV), increased 40% in the quarter that ended on March 31st and thus reached a total of $40 billion. This is the lowest growth rate in the past 11 quarters even though sales on mobile devices have undergone about 257% every year.
This means that e-commerce user saturation is an imminent problem for Alibaba. The increase in annual active buyers or customers who purchase a product at least once yearly from Alibaba was the slowest in the last three-and-a-half years and were about $350 million, which is just a 5% increase from the last quarter. The group will continue their investments in areas such as cloud computing, digital entertainment and mobile internet, according to Maggie Wu, the company’s chief financial officer. Decelerating profit growth is another problem that Zhang will have to contend with.