Alibaba to cut 7% of workforce in its cloud unit as it pursues IPO

alibaba The company is cutting 7% of its cloud computing workforce as the unit prepares for an IPO.

The Chinese e-commerce giant will offer severance packages to those affected, a person familiar with the matter confirmed to CNBC on condition of anonymity because he could not speak publicly. The same source added that Alibaba has started notifying employees of the layoffs and helping them relocate internally to different positions if they wish.

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It previously announced plans in March to split the company into six business units, each with its own chief executive and board.

Last week, the company announced plans to fully spin off its cloud computing unit, saying it intends to make the unit a separate public company. Alibaba aims to complete the spin-off within the next 12 months.

Alibaba Chief Executive Yong Zhang has long seen cloud computing as an important part of the e-commerce giant’s future, but it currently accounts for just 9 percent of the group’s total revenue. Revenue has been slowing down significantly over the past few quarters. In fact, revenue in the first quarter of this year was down 2% year-over-year.

Zhang said on the company’s earnings call last week that this was “in part due to our aggressive adjustment of revenue structure and focus on high-quality growth, but also the result of external changes in the market environment and customer composition.”

TikTok owner ByteDance began shifting its international operations away from Alibaba’s cloud, continuing to weigh on the company’s cloud business.

Still, Alibaba has made some headway in its cloud business over the past few years.In terms of market share, it ranks first in China and second in the Asia-Pacific region, after amazon, according to Synergy Research Group. Globally, however, it still trails giant Amazon, Microsoft and Google.