INTERNET: Alibaba Links Maps, Browsers With Executive Move
Bottom line: Alibaba’s combining of its mapping and web browser units under a single leader marks the start of a necessary rationalization of its many acquisitions over the last 2 years, which could produce some odd pairings.
After nearly 2 years of making billions of dollars in strategic acquisitions, we’re finally seeing an attempt by e-commerce giant Alibaba (NYSE: BABA) to integrate and rationalize some of those purchases through new tie-ups and other pooling of assets. In this case the integration is coming in an executive move, which is seeing the founder of its AutoNavi online mapping division leave the company. His former position will be taken over by the founder and head of Alibaba’s UCWeb browser division, combining the 2 units under the leadership of a well-respected tech leader named Yu Yongfu.
Chinese media have been buzzing with news of this particular move, which was announced late last week by Alibaba CEO Jonathan Lu. (Chinese article) That’s because the move involves 2 of Alibaba’s biggest purchases over the last year, and thus will create a new unit valued at $3 billion or more, based on what it paid for AutoNavi and UCWeb. Alibaba bought AutoNavi last year for about $1.5 billion in 2 tranches. It also purchased UCWeb for a similar amount, though it didn’t disclose an actual price.
The reports don’t contain much information besides the actual executive move. Lu’s memo said that AutoNavi will continue to operate as an independent unit, and that Yu’s position as its head became effective on March 15. The move comes about 8 months after Alibaba acquired UCWeb, in a deal that occurred over several stages as Alibaba first bought strategic stakes in the company and then finally purchased it outright. (previous post)
The timing appears to show that Alibaba’s top management, including both Lu and founder Jack Ma, were sufficiently impressed by Yu Yongfu to entrust him to run 2 of the company’s largest acquisitions so far. That’s not too hard to believe, as Yu has built UCWeb into a very successful Chinese web browser with global aspirations, aiming to compete with the likes of Google’s (Nasdaq: GOOG) Chrome and Mozilla’s Firefox.
Other companies attempted to buy UCWeb in the past, including leading search engine Baidu (Nasdaq: BIDU), but were rebuffed by Yu, who is fiercely independent and well respected in China’s Internet sector. The fact that he allowed UCWeb to be acquired in stages by Alibaba implies there was probably an understanding between the companies that he would eventually become the head of one of its major divisions.
We need to see more of this kind of consolidating by Alibaba, which has a wide range of assets acquired over the last 2 years as it spent billions expanding into many new areas. The timing of this particular move also looks relatively sound, since Alibaba needs some time to become familiar with all of its new assets and their managers before deciding how to combine them and who should lead them.
In this case the selection of Yu also looks relatively good, as he’s known as an innovator and strong leader who built up UCWeb into a company worth more than $1 billion. But I’m less convinced about the potential synergies between a web browser like UCWeb and an online mapping services company like AutoNavi. Perhaps Yu will try to integrate some of AutoNavi’s services into the UCWeb browser, though such a pairing would only work in China due to AutoNavi’s Chinese focus.
From a broader strategic perspective, I’m happy to see that Alibaba is finally starting to take a closer look at its acquisitions and find ways to make them work better together. Of course it would have helped if Alibaba had considered potential synergies before it embarked on its buying spree, rather than its apparent strategy of buying anything with an Internet angle. At the end of the day this kind of shuffling and consolidation is necessary, but many of the moves may not work very well due to the highly different nature of many of Alibaba’s myriad assets.
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