ALIBABA Group Holding’s cloud division has begun a round of job cuts that could reduce its staff by about 7 per cent, part of an overhaul aimed at preparing the once fast-growing unit for a spinoff and eventual IPO.

China’s largest cloud service has begun offering severance to employees or transfers to other parts of the Alibaba empire, a person familiar with the matter said. The moves are intended to streamline the business, which Alibaba aims to fully carve out into a separate company within a year, the person said, asking to remain anonymous discussing internal plans.

Alibaba Cloud is one of the biggest companies that will be created in a six-way split of the parent, joining other units such as the Cainiao logistics division and international commerce in pursuing independent fundraising and potential listings.

Chief executive officer Daniel Zhang last week outlined details of the historic shakeup for the first time. That included a plan to fully relinquish control of the business known as Alibaba Cloud, a once-thriving operation that harboured the potential to supercharge the company the way Amazon Web Services grew to signify Amazon.com

Some analysts valued the business at upwards of US$30 billion, a prime beneficiary of a post-ChatGPT upswell that depends on cloud resources to train next-generation AI models. Representatives of the unit didn’t immediately respond to a request for comment.

Alibaba picked the cloud unit as an early IPO candidate because of its more developed business model and customer profile. Zhang has said the spinoff was intended to simplify the overall structure and respond to market needs. A standalone cloud platform could grow to some day even surpass Alibaba in size if it attracted the right external financing, he told analysts last week. BLOOMBERG

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