• by Thom Forbes  @tforbes, August 7, 2020

COVID-19 has transformed Uber’s primary business into food delivery -- at least for the nonce -- but it’s still losing money. Still, there’s a bright upside to the story, particularly if you are Uber’s CEO.

“Amid a pandemic that’s kept workplaces, restaurants, and bars closed and potential riders housebound, the company’s classic rides business cratered, with total bookings dropping by 75% year over year. But eaters the world over turned to food -- and food delivery -- while stuck inside. For the first time, the company’s delivery segment generated more in bookings than its rides segment. More than double, in fact. Eats’ bookings grew 112% year over year,” Aarian Marshall writes  for Wired. 

“CEO Dara Khosrowshahi noted on a call with investors Thursday that delivery is now the size of Uber’s rides business when he joined the company in 2017,” Marshall adds.

“We’ve essentially built a second Uber in under three years,” he said on the Q2 2020 call transcribed  by Seeking Alpha.

Uber, “has long dabbled in other categories, including meal deliveries with its Uber Eats service. But those efforts have accelerated in recent months,” Sara Ashley O’Brien writes for CNN Business.

“In July, Uber further committed to the category when it announced a deal to buy on-demand delivery startup, and former Eats competitor, Postmates for $2.65 billion. The deal is expected to close in the first quarter of 2021,” she reminds us.

Khosrowshahi “believes Uber users will continue to order food and other items through Uber delivery services even after the pandemic subsides, and stay-at-home orders are lifted,” Lora Kodlodny writes for CNBC. “Among other new delivery services the company is offering, Uber Connect lets users send small packages via UberX drivers to local destinations. The service has made 3 million trips globally since it launched in early June, the CEO said.

“He also said that the ride-hailing business was recovering at different rates in different parts of the world. Rides were down 50% to 85% in top U.S. markets during the second quarter, he said, but in top European markets, including France, Spain and Germany, rides were only down about 35% year-over-year,” Kolodny adds.

“The revenue decline was the steepest since Uber went public in May 2019, though total revenue was better than what Wall Street analysts had projected. Uber’s losses improved from $5.2 billion a year ago when it had heavy stock-based compensation costs after its initial public offering,” Kate Conger writes  for The New York Times.

“The company has been under pressure from investors to stem its enormous losses and show how it can start posting a profit. Uber and Lyft, which both went public in 2019, have set records for the amount of money lost in the run-up to their respective IPOs. And since going public, both companies have continued to lose money, raising questions about the long-term sustainability of app-based ride-hailing as a business. Uber had to lay off  around 1,000 workers last year amid restructuring efforts,” Andrew J. Hawkins writes  for The Verge.

“Daniel Morgan, a portfolio manager at Synovus Trust Co., said given the number of retailers, schools and workplaces closed or at reduced capacity, transportation use will probably remain low for the foreseeable future. ‘Continued high Covid-19 case levels will likely weigh on ride-sharing demand throughout 2020 and into 2021,’ he wrote in a note to clients,” reports  Bloomberg’s Lizette Chapman.

“In an acknowledgment of the long-term consequences of the pandemic, Uber said this week that its own employees could work from home until the end of June 2021. As the effects weigh on the business, Khosrowshahi has turned to cost-cutting. He eliminated about a quarter of the workforce in May and shuttered dozens of offices,” Chapman adds.

Meanwhile, “a California judge signaled on Thursday he might be leaning against a request for a preliminary injunction forcing Uber Technologies Inc and Lyft Inc to classify drivers as employees rather than contractors,” Reuters’ Jonathan Stempel writes  for Yahoo Finance.

“In a hearing in San Francisco Superior Court, the companies said the classification would irreparably undermine their business models, with Lyft’s lawyer Rohit Singla saying it ‘would make things worse’ for drivers and riders.

“Judge Ethan Schulman said he would try to rule within ‘days’ on the injunction request from California Attorney General Xavier Becerra and the cities of Los Angeles, San Diego and San Francisco, in their lawsuit filed May 5,” Stempel adds.