Covid-19 is almost affecting every industry right now. Service providers in particular have had to halt their operations entirely, as there is simply no way to get to their customers.
While most tech companies have managed to by-pass these losses with their operations online, others have not been so fortunate. Case in point: Uber.
The service-based tech giant has not been immune to the effects of Covid-19 – in fact they are buckling, as both their transportation and popular food delivery service, Uber Eats, have taken massive hits.
In a shocking development, Uber Eats announced that they will be downscaling their operations by pulling out of seven countries across the globe, as they rush to adapt to the new realities of the coronavirus pandemic.
On Monday (04/05), the share prices of Uber Technologies Inc. plummeted after Uber Eats announced they will cease operations in Czech Republic, Egypt, Honduras, Romania, Saudi Arabia, Uruguay and Ukraine by 4 June. The company also stated that it would transfer Uber Eats business operations in the United Arab Emirates to Careem, Uber’s Middle Eastern subsidiary, by the same day. In addition, Careem said it has plans to cut over 30% of its staff.
The move comes after Uber has suffered international losses due to the coronavirus, as would-be riders are reluctant to get into a car with a stranger, and lockdown regulations have prevented food delivery services in many countries.
However, Uber says this sudden downsize forms part of a broader, on-going strategy that sees the company shutter operations in regions where it isn’t popular.
“These decisions were made as part of Uber’s ongoing strategy to be in first or second position in all Eats markets by leaning into investment in some countries while exiting others,” they said in a Securities and Exchange Commission filing.
The discontinued and transferred operations represent only 1% of Uber Eats’ gross bookings, and 4% of the company’s of EBITDA losses as shown in the first quarter report of 2020.
“Consistent with our stated strategy, we will look to reinvest these savings in priority markets where we expect a better return on investment,” Uber said.
Bernstein analyst, Mark Shmulik also advised that Uber’s action “should be a positive signal to investors that the company is heading in the right direction,” and that we should anticipate additional restructuring in Europe and Latin America as this likely only round one of on-going efforts.
Moreover, it was reported that Uber is considering laying off approximately 20% of their 20 000 workers. This comes as no surprise given the falling share prices over the past few months. Uber shares recently traded at $27.81, down 2.04%. The stock has dropped 26% in the last three months, compared with a 13% slide for the S&P 500.