Alibaba is chopping 7% of the workforce in its cloud computing division because the unit gears up for an preliminary public providing.

The transfer, confirmed to CNBC by an individual accustomed to the matter who most popular to stay nameless as a result of they weren’t in a position to communicate publicly, will see the Chinese language e-commerce large provide severance packages to these affected. Alibaba has begun informing employees of the layoffs and can also be serving to them to maneuver to completely different positions internally in the event that they need, the identical supply added.

This comes after it introduced plans in March to separate the corporate into six enterprise models every with their very own chief government and board of administrators.

Final week, the corporate introduced plans for a full spin-off of its cloud computing unit and mentioned it intends for the division to grow to be an unbiased publicly listed firm. Alibaba goals to finish the spin off throughout the subsequent 12 months.

Alibaba’s CEO Daniel Zhang has long-seen cloud computing as a key a part of the e-commerce large’s future but it surely presently accounts for simply 9% of the group’s whole income. And income has been slowing considerably over the previous few quarters. In reality, income fell 2% year-on-year within the first quarter of the yr.

Zhang mentioned on the corporate’s earnings name final week that this was “partially resulting from our proactive transfer to regulate our income construction and deal with high-quality development, and in addition a results of exterior adjustments in market setting and buyer composition.”

TikTok proprietor ByteDance started transferring its worldwide operations off of Alibaba’s cloud which continues to weigh on the corporate’s cloud enterprise.

Nonetheless, Alibaba has made some headway with its cloud enterprise over the previous few years. It’s the primary participant by market share in China and quantity two in Asia-Pacific, simply behind Amazon, in accordance with Synergy Analysis Group. Nevertheless, on a world degree, it nonetheless trails giants Amazon, Microsoft and Google.