Uber sheds employees….again

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Uber

A new round of layoffs at ride-sharing service Uber is creating more concern about the longevity of the groundbreaking company after the front-runner revolutionized transportation over the last few years by bringing key competition to the old ‘yellow cab’ service model.

In July, Uber announced layoffs of around 400 people – now it’s cutting another 435 employees, or 8% of two critical departments, according to breaking reports.

Where the layoffs are occurring is also a troubling sign – the move will affect the company’s engineering and product teams.



“We need to shift how we design our organizations: lean, exceptionally high-performing teams, with clear mandates and the ability to execute faster than our competitors,” an Uber spokesman said in a statement according to reporting yesterday at CNet. “Today, we’re making some changes to get us back on track, which include reducing the size of some teams to ensure we are staffed appropriately against our top priorities.”

Although CEO Dara Khosrowshahi reportedly talked about “overlapping work” and “mediocre results” in explaining the current layoff cycle, many outsiders see the layoffs as simply a key indicator of weakness for the company.

Uber stock has also fared somewhat poorly compared to its breaking IPO price of over 40 dollars per share. As of last month, the equity was dipping under that starting point and fell precipitously down to a current value of around $33 per share.

Then there are also rumblings of federal efforts to reclassify Uber drivers as employees rather than independent contractors, where current IRS criteria has many companies questioning whether they can get away with issuing 1099s for workers.

Uber and other ride sharing companies will face an uphill battle to meet (requirements for legally supporting a contractor classification),” writes Sachi Barreiro at Nolo. “In particular, drivers will have a strong argument that their services are central to Uber’s business—providing transportation to consumers—and that they aren’t engaged in an independent occupation.”

If recent stock losses at Uber are tied to layoffs and other troubling indicators, expect them to fall further as the market ingests the new reports of these large belt-tightening moves, and the market assesses the staying power of Uber against its competitors.

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