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Uber Announces Layoffs, Then Invests In Lime

Image via Zera Li on Unsplash

With people all over the world limiting the amount of time they spend outside of their homes as a result of COVID-19, it's not surprising that Uber is getting hit particularly hard.

A few weeks ago, it was reported that Uber's global gross bookings and value of bookings have declined 80% and more than 50%, respectively, from the same period a year earlier. Uber Eats—the company's meal delivery service, has reportedly seen an uptick in business, however, it's much smaller than Uber's ride-sharing business and loses money.

An Uber spokesperson pointed to comments made by CEO Dara Khosrowshahi, that if Uber saw an 80% decline in bookings for the rest of the year, then the company would still have $4 billion in cash.

With bookings down, Uber has turned to goods delivery in an attempt to get some of the lost revenue back. Uber recently revived Uber Direct and Uber Connect. Uber Direct enables businesses to deliver goods to customers, while Uber Connect enables individuals to send items to their friends or family.

Despite Uber Eats, Uber Direct and Uber Connect trying to fill the void, Uber still withdrew its 2020 financial guidance last month. Uber also announced it expects to take an impairment charge of between $1.9 billion and $2.2 billion as a result of minority equity investments the company made.

This week, Uber disclosed its intention to lay off 3,700 employees, or 14% of its global workforce. Uber said the layoffs are to reduce operating expenses "in response to the economic challenges and uncertainty resulting from the COVID-19 pandemic and its impact on the company’s business."

"Days like this are brutal. I am truly sorry that we are doing this, just as I know that we have to do this," Khosrowshahi wrote in an email to employees. "We are looking at many scenarios and at each and every cost, both variable and fixed, across the company."

Despite the decline in ridership and the need to cut operating expenses via layoffs, Uber announced yesterday it is leading a $170 million investment round in scooter startup Lime.

Ironically, as the company prepares to write-down prior poor investments, Uber is investing in a company that reportedly lost more than $300 million in 2019. Lime's valuation in this funding round is reportedly down 79% from its April 2019 valuation of $2.4 billion to $510 million.

"We’re glad that our customers will continue to have access to bikes and scooters in both our apps because we believe micro-mobility is a critical part of the urban landscape, now more than ever," Khosrowshahi said of the acquisition.

While Uber's goal of tying its business into that of Lime's is not necessarily a bad thing, the news of the investment coming just one day after announcing mass layoffs may not sit particularly well with employees.

We now wait to see if Uber will one day add Lime to the growing list of investments that it has to write down.

Leftover Crumbs

  • 33.5 million. 3.17 million Americans filed initial jobless claims last week, bringing the total over the prior seven weeks to an astonishing 33.5 million, according to the Labor Department. Last week's initial jobless claims total is the lowest since the week ending March 14 and has now declined for five-consecutive weeks. The four-week moving average fell by 861,500 to 4,173,500, while continuing claims rose by 4.6 million to more than 22 million.

  • Moderna gets OK for phase 2 trial. The Food and Drug Administration has approved Moderna's coronavirus vaccine for phase 2 trials. Moderna said it will begin phase 2 trials on 600 participants shortly, with plans to begin phase 3 trials as early as this summer. "We are accelerating manufacturing scale-up and our partnership with Lonza puts us in a position to make and distribute as many vaccine doses of mRNA-1273 as possible, should it prove to be safe and effective," Moderna CEO Stephane Bancel said.

  • No free lunch. Google told employees they cannot expense items such as food, fitness, home office furniture, decoration or gifts while working from home. Google also told employees that unused funds from their budgets cannot be used to purchase meals for themselves and their teams during virtual meetings or donate to charities. A Google spokesperson declined to comment on the news.

  • Apple awards $10 million. Apple has awarded $10 million to COPAN Diagnostics to help boost the company's output of nasal swabs used for detecting COVID-19. Apple will also help the company source and design new equipment from two industrial robotics manufacturers. "We feel a deep sense of responsibility to do everything we can to help medical workers, patients, and communities support the global response to COVID-19," Apple COO Jeff Williams said.

  • Neiman Marcus joins the list. Neiman Marcus has filed for Chapter 11 bankruptcy, joining J.Crew, John Varvatos and Gold's Gym as companies that have filed this week as the coronavirus hits the economy. Neiman Marcus struck a deal with creditors to eliminate about $4 billion of its existing debt. "We will emerge a far stronger company," Neiman Marcus CEO Geoffroy van Raemdonck said. "In a world that is changing, we are uniquely positioned to give our brand partners access to our loyal luxury customers like no other company."