Wednesday, March 7, 2018

"Uber Spent $10.7 Billion in Nine Years. Does It Have Enough to Show for It?"

Back in December 2016 one of the authors of this piece, Eric Newcomer, came dangerously close to mansplaining Uber, Uber's losses and Uber in China to the FT's Izabella Kaminska.*
His central fallacy (besides arguing in public) was that Uber, having ditched the money-sucking black hole that was their China operation was now heading for the broad sunlit uplands of  taxi service (thanks Winston). He was wrong.

Here's the latest from Bloomberg:

Uber is a financial oddity. Can it mutate into a sustainable business?
What makes Uber Technologies Inc. the most valuable venture-backed technology company in the world? Investors say size and growth. The business is transforming global transportation networks. On closer inspection of its financial performance, Uber also pioneered a very expensive way of establishing a market and staying on top.

Uber has had little trouble finding investors eager to buy into its vision. It relishes telling backers about gross bookings, or the amount riders pay for service. That number is enormous, totaling $37 billion last year. But most of that goes to drivers. Uber’s cut, or net revenue, came to $7.4 billion. Compared to public companies with similar valuations, Uber’s revenue lags well behind. (See chart below.)

At the same time, Uber has worked to downplay its persistent losses. Because the company doesn’t disclose financial results with much consistency, it’s easy to lose sight of how much of investors’ money Uber has spent. Since its founding nine years ago, Uber has burned through about $10.7 billion, according to a person familiar with the matter. Over the past decade, only one public technology company in North America lost more in a year than Uber lost in 2017. None has burned such a tremendous amount in the first stage of its life, according to data compiled by Bloomberg.
Investors have contributed $17.3 billion to Uber, said the person, who isn’t authorized to discuss the figure and asked not to be identified—an enormously long leash for the company to experiment with and subsidize global growth. Figuring out whether that investment will pay off is partly based on what you think will happen to Uber’s losses.

An analysis of Uber’s financial position, based on Bloomberg reporting and voluntary disclosures by the privately held company, shows that Uber is a corporate anomaly. Few companies in history have grown so fast or lost so much money in such a short period of time. Uber has developed what may be considered a Peter Pan syndrome. After reaching a stage of maturity most companies never realize, it has yet to turn a profit and remains deeply in the red.

Uber showed a sign of promise in the first few months with Dara Khosrowshahi at the helm: Its loss narrowed from the previous quarter. “Our growth at scale remains incredibly strong, and we are driving meaningful improvements in our margins,” an Uber spokesman wrote in an emailed statement. “Under Dara’s leadership, we are making big bets for the long term in new technology like Express POOL and in businesses like UberEATS, which is growing at an extraordinarily fast rate.”
Typically, when a business posts a multibillion-dollar loss, it’s followed by many quarters or years of penance. Hewlett-Packard reported a loss of $14.7 billion in 2012, mostly due to the discovery of financial falsehoods related to the acquisition of Autonomy. HP made up for that loss in subsequent years when it generated billions in profit.

The only other public tech companies that have come close to rivaling Uber’s ability to lose money are chipmakers....MUCH MORE
*Besides the fact Izabella was one of the first journos, along with Pando founder Sarah Lacey who had the advantage of being the target of an Uber smear campaign funded to the tune of a mil. to tip her off that something was not right over on Market St., San Francisco, CA, USA; besides the fact Ms Kaminska was on the story back in 2014 she has additionally posted more on the Ubester than most folks alive.
Here is part of the to-ing and fro-ing:
There's more, here's one of the threads.

A couple months later we recapped the story in:
Notes to Self If Arguing With The FT's Izabella Kaminska: Uber and the Multi-Billion Dollar Losses Edition
The denouement in that piece was epic.

To his credit Mr. Newcomer has taken a more gimlet-eyed view of Uber over the last year, so we continue to read and from time-to-time, link.