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Uber Is Laying Off Hundreds of Employees (Again)

By Evan Niu, CFA - Oct 15, 2019 at 7:30AM

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The ridesharing leader has cut nearly 1,200 workers in recent months.

It's been a rough year for ridesharing leader Uber (UBER -1.27%), which went public in a highly anticipated IPO in May only to be greeted by widespread skepticism. The core ride-hailing business has poor unit economics, and the company reported a staggering $5.2 billion loss in the second quarter. Much of that red ink was attributable to going public, as companies commonly recognize substantial stock-based compensation expenses in connection with their IPOs.

For the third time in as many months, Uber is laying off hundreds of employees in an effort to cut costs.

Uber and Uber Eats apps displayed on an iPhone

Image source: Uber.

The "last wave" of cuts

TechCrunch reports that Uber has let approximately 350 employees go in the latest round of cuts, or roughly 1% of the company's total head count. The affected workers span various departments including Uber Eats, recruiting, and Advanced Technologies Group.

Uber had laid off 400 employees from its marketing division in July, or about a third of that department. That was followed by another 435 unlucky workers in September, representing around 8% of its product and engineering teams.

This is also the first time that the Advanced Technologies Group, which is tasked with developing autonomous vehicles, is being affected, according to the report. That team will still have around 1,200 employees working on the technology, which is widely considered to be critical for Uber to achieve profitability. Uber Eats, the food-delivery segment, had also been unscathed up until now.

"As you know, over the past few months, our leaders have looked carefully at their teams to ensure our organizations are structured for success for the next few years," CEO Dara Khosrowshahi wrote in a companywide email obtained by the outlet. "This has resulted in difficult but necessary changes to ensure we have the right people in the right roles in the right locations, and that we're always holding ourselves accountable to top performance."

This round will be the "last wave" of layoffs, Khosrowshahi added.

Uber has more employees than you think

Operating in 63 countries across six continents, Uber is a sprawling enterprise that employed nearly 23,000 workers at the end of 2018, according to its prospectus. Roughly 30% of the latest cuts affected workers outside of North America.

Function

Head Count

Operations and support

11,860

Research and development

5,459

General and administrative

2,993

Sales and marketing

1,951

Total

22,263

Data source: Prospectus. Head count as of the end of 2018.

That doesn't include drivers, which Uber classifies as independent contractors and represent the bulk of the overall workforce. The ballooning head count is the primary contributor to soaring costs. Uber is also fairly acquisitive, which also adds to head count growth.

The company said last week that it would acquire a majority stake in Cornershop, an online grocery delivery service, and recently borrowed $750 million to help fund its previously announced acquisition of Careem. Including its IPO and other investments, Uber had previously raised $10 billion in four months, but it still needs to reduce its cash burn rate if it ever wants to satisfy investors.

Evan Niu, CFA has no position in any of the stocks mentioned. The Motley Fool recommends Uber Technologies. The Motley Fool has a disclosure policy.

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