Uber’s Week: Another Two Top Departures, But 1Q Loss Trimmed
It was a short work week due to the Monday holiday, but news about the ride-hailing behemoth Uber kept up its heavy pace as the company announced another two high-profile departures and revealed some financial results for the first quarter.
The San Francisco-based unicorn, whose value is pegged at about $70 billion, said it had trimmed its quarterly loss to $708 million, compared to $991 million in the fourth quarter of 2016, Reuters reported. First quarter revenue rose 18 percent to $3.4 billion. Uber, which is not a publicly traded company, isn’t required to unveil its full financial picture, but it occasionally releases selected figures.
Despite its continuing growth and revenue in the multi-billions, Uber has come under critical media scrutiny this year due to a series of missteps and controversies. Among the company’s troubles is a lawsuit by Waymo, a unit of Google parent company Alphabet, claiming that Uber made use of Google trade secrets to develop its self-driving car technology. Waymo alleges that former Google engineer Anthony Levandowski shared those secrets with Uber when Uber hired him to spearhead its own development of autonomous vehicles. On Tuesday, Uber fired Levandowski, who had failed to meet a company deadline to deliver information relevant to the court case.
Levandowski was the first of two high-profile executive exits from Uber this week. The second was Uber’s head of finance Gautam Gupta, whose departure to join another company was announced along with Uber’s financial numbers on Wednesday.
New York Times stories on Uber are now often accompanied by an infographic showing the growing roster of top staffers who have left the company. They include engineers involved with artificial intelligence, mapping, and self-driving cars, as well as a few executives who left after Uber commissioned an investigation of Uber’s in-house culture. That probe was triggered in February, after former Uber engineer Susan Fowler wrote a widely read blogpost accusing company managers of failing to take action when she told them she had been sexually harassed by a supervisor. Fowler also described a generally roughhouse, inefficient management culture in which women frequently suffered harassment.
That, and other controversies that have tarnished Uber’s reputation, were detailed in a New York Magazine piece that kicked off the work week Tuesday under the headline “Is Uber Evil, or Just Doomed?” Writer Reeves Wiedeman describes Uber as facing an “existential crisis,” not only due to bad press, but due to vulnerabilities in its long-term business model.
Uber has expanded into many U.S. cities and dozens of countries, but it faces constant battles to operate free of regulations that apply to traditional employers such as taxicab companies. In recent years, Uber drivers have sued to be classified as employees qualified for benefits, rather than as independent contractors. The company has also been accused of inducing drivers to finance the lease or purchase of cars, only to later lower the rates for rides, undermining the income drivers need to pay off the cost of acquiring their vehicles. Uber CEO Travis Kalanick issued a public apology after he was captured on video in February in a testy exchange with a driver who reproached him for lowering rates. The company has also allegedly used a technology called Greyball to mask its presence in cities it didn’t have permission to serve.
Underlying all these troubles, Uber’s growth has depended on price competition with taxis, as well as the convenience of tapping an app to summon a ride. But its low rates are now possible because Uber draws on the billions invested in it by venture capital firms, as Wiedeman, Xconomy, and others have pointed out. Uber reportedly has more than $7 billion left of this cash trove, but it has been posting recent annual losses of $2 billion or more. The question is whether Uber can eventually become a profitable global corporation without relying on these cash infusions, and without raising its rates to uncompetitive levels.
Already in New York, Uber faces competition not only from its San Francisco ride-hailing rival Lyft, but also from cut-rate Manhattan operators Gett and Via, and two apps, Arro and Curb, that have been created to summon traditional cabs.
Uber has been pursuing the driverless car as an escape from the hassles and expense of engaging drivers. But the big companies that might manufacture self-driving cars at scale, from Google to Ford to Tesla, could develop their own apps, or partner with an Uber rival such as Lyft.
Wiedeman writes, “Conversations with several dozen current and former Uber employees and executives suggested that though there is time to right the ship, and a war chest of venture capital to do so, Silicon Valley has found itself at least preparing for the notion that it mispriced its darling. Uber could be the next MySpace, some say, a company that created a market but was foiled by its own missteps and overtaken by savvier competition.”
For next week’s news cycle, Uber can look forward to digesting, and possibly releasing, the results of the investigation of the company’s workplace culture by former U.S. Attorney General Eric Holder’s law firm.