Chinese online retailer Alibaba has agreed to provide cloud services and big data analysis to Sinopec, the largest oil refiner in Asia. Sinopec, also known as China Petroleum & Chemical Corp, said that the agreement did not involve equity cooperation. The tie-up was only for technical services, reports John Ruwitch of Reuters.
Alibaba leveraging its good relations with the government
The tie-up between Sinopec and Alibaba is in line with the Chinese government’s policy. Beijing has asked state-run enterprises to take advantage of information technology, big data and cloud computing to improve efficiency. Alibaba’s services would help Sinopec better track demand, supply and emissions. The Hangzhou-based company has leveraged its good relations with the government to ink deals with various state-run firms.
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Allen Zhang, head of Alibaba’s cloud business Aliyun, told Reuters that the company would bring about new business opportunities by helping Sinopec with big data and digitization technologies. Sinopec said that Alibaba will help it upgrade its traditional petrochemical services and perform data analytics covering the whole production chain.
The two juggernauts are also discussing cooperation in vehicle networking, e-commerce, online payments, and Internet of Things. Aliyun dominates the Chinese cloud services market with 23% share. It claims to have more than 1.4 million cloud customers in China. Last month, Alibaba opened its first cloud data center in the United States, where it will be competing against the giants like Microsoft and Amazon. The company also plans to expand its cloud business to Europe and Southeast Asia later this year.
Brean Capital cuts price target on Alibaba
On Thursday, Brean Capital analysts slashed their price target on Alibaba from $110 to $97. However, the research firm affirmed its Buy rating on the stock. Brean Capital said that recent changes in Alibaba’s advertising system would hurt monetization and growth in the near term. Alibaba is enforcing stricter policies to eliminate fake goods from its platforms. These moves are critical to the company’s sustainable long-term growth, said analysts.
Alibaba shares fell 0.81% to $83.38 in pre-market trading Friday.