Wednesday was a historic day for Uber Technologies Inc, the ride-hailing giant: At long last it was able to declare a quarterly profit. According to Bloomberg, it turned a $2.5-billion profit during the first three months of this year after having burned through over $10 billion in the past nine years. And it's all thanks to income that came in from selling its business unit in Russia to Yandex and its Southeast Asian business to Grab.
If you exclude this one-time gain from the equation, the company lost $312 million. But that's still an improvement from the $775 million it lost last quarter and the $598 million lost a year ago. Reuters added that its ride bookings jumped 51 per cent year-on-year while revenue went up 73 per cent to $2.6 billion in the same period.
All of which looks great for a company that plans to go public next year. But before that Uber Chief Executive Dara Khosrowshahi has to focus on trimming losses further and proving that the company can turn more sustainable profits. He will also have to hire a chief financial officer after a three-year vacancy. According to media reports, Uber failed to secure VMware CFO Zane Rowe for the role, and lost several other high-ranking executives recently, including VP of global vehicle programs Sherif Marakby.
Significantly, Uber has announced that it would hold a secondary stock sale for employees and existing investors that would value the company at $62 billion. Coatue Management, a new investor, and existing Uber investors Altimeter Capital and TPG will purchase up to $600 million of stock at $40 a share. The transaction will launch next week and likely close at the end of June. In Uber's previous secondary stock sale, which was led by SoftBank Group, the company had commanded a valuation of $48 billion valuation and investors bought shares for $33 each. Back then there were so many eager sellers that shareholders could sell only a fraction of what they wanted. The same story may play out this time too.
This development is a clear sign that the Uber management is trying to appease long-time shareholders antsy for a payout. If that much-talked about IPO does not happen, some investors could reportedly be free to sell shares in the private market.
But the big question is why would Uber, which ranks among the world's highest valued private venture-backed companies, even want to go in for an IPO?
That's not on account of it still by and large being in the red. The successful 2017 IPO of Snap Inc., parent of Snapchat, proves that even a loss of more than 100 per cent of a company's revenue is no stumbling block. In comparison, Uber's losses - barring the windfall from selling its overseas units - were only 20 per cent of its net revenue.
However, as the news company pointed out, Uber is the perfect company for the post-2010 period in the technology industry - tailor-made for an era where capital is plentiful and easily available to superstar startups that aim big and grow rapidly, costs be damned. Its business is booming. It is over the ugliness of the sexual harassment allegations, potential theft of trade secrets, a massive data breach and lawsuits from drivers and employees. So why not break the rules once again and never go public at all?
In any case it is likely to have its hands full in the near future navigating a PR disaster. The US National Transportation Safety Board (NTSB) has completed its investigation into the pedestrian death caused by one of Uber's self-driving vehicles in March, and the recently-released findings are pretty damning.
The report said that Uber's self-driving system has two distinct control modes, computer control and manual control. Furthermore, the Volvo vehicle involved in the accident was factory equipped with several advanced driver assistance functions, including a collision avoidance function with automatic emergency braking as well as functions for detecting driver alertness. But all these Volvo functions are disabled when the test vehicle is operated in computer control and Uber relies on an attentive operator to intervene if the system fails to perform appropriately during testing.
"According to data obtained from the self-driving system, the system first registered radar and LIDAR observations of the pedestrian about 6 seconds before impact," read the report, adding that "As the vehicle and pedestrian paths converged, the self-driving system software classified the pedestrian as an unknown object, as a vehicle, and then as a bicycle with varying expectations of future travel path. At 1.3 seconds before impact, the self-driving system determined that an emergency braking maneuver was needed to mitigate a collision."
But that had not been enabled as mentioned earlier, and instead the vehicle operator was relied on to intervene and take action. "The self-driving system data showed that the vehicle operator intervened less than a second before impact by engaging the steering wheel. The vehicle speed at impact was 39 mph. The operator began braking less than a second after the impact," it added.
Yes, Uber can say that the findings also mentioned that the pedestrian was dressed in dark clothing, her bicycle did not have side reflectors and she did not pay heed to what all moms the world over drum into kids - look left and right before crossing the road. But actions speak louder than words and ahead of the NTSB release, Uber announce that it had shut down its Arizona self-driving car operation. Does the fate of the entire programme now hang in balance?
With Reuters inputs
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