What's going on?

Alibaba flexed its muscles on Tuesday, announcing that it�s splitting along six sharply defined business lines.

What does this mean?

A heavy-handed regulatory crackdown wiped half a trillion from Alibaba�s market value in recent years, but the firm�s fortunes finally seem to be looking up. See, the Chinese government�s warming to tech businesses once again, in what analysts see as a necessary step toward this year�s 5% growth target. And Alibaba’s elusive founder Jack Ma � typically a persona non-grata in mainland China � is back after a year-long hiatus, in what might signal a long-awaited olive branch from the government. At any rate, Alibaba�s gearing up for a major transformation, splitting its empire into six distinct business lines. That�ll see the company separate divisions like cloud and logistics from its main e-commerce segment � giving each one more autonomy and paving the way for independent stock market listings down the line.

Why should I care?

For markets: The opposite of synergy.
Investors tend to be skeptical about conglomerates� ability to juggle unrelated businesses under one roof, and that means multipurpose firms aren�t always as valuable as the sum of their parts. In Alibaba�s case, splitting up its business segments could allow each division to innovate and grow more quickly � while giving investors the option to bet on more �pure-play� firms if they do end up being listed separately. That could be why the announcement went down a treat with investors, who sent shares up 9% when the news broke.

The bigger picture: Wake up and break up.
In some ways, this is a win for the Chinese government too. One main worry for regulators was that concentrated power in the tech industry could stifle broader innovation � and by decentralizing decision-making, Alibaba�s done something to address that. In fact, some pundits think that Alibaba could start a trend among its tech rivals, which have generally steered clear of big shakeups and split-ups to date.