UBER saves cost by ‘cutting’ people. Wall Street analysts like it.

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These days, we see many big names letting people go because of the effects from COVID-19 economy shutdowns. Without economy activity, business suffers and soon the company would not have enough funds to continue paying salaries. Thus, they have to let people go. Another famous name is also letting people go because it has to manage its cost. It’s the ride-hailing brand which retreated from the South East Asia market but has now a big stake in GRAB. The company is Uber.

Uber was established in 2009. It has been growing its presence throughout the world and thus the focus was on market growth instead of becoming profitable or self-sustaining. As at 2019, for the full year, Uber said it lost $8.5 billion (RM37 billion). At the same time, It said chances are high that it could be profitable by end of 2020. The loss and the profit prediction is here in this article and it was before the arrival of COVID-19.

Article in marketwatch.com here. Uber Chief Executive Dara Khosrowshahi informed employees via a memo that Uber will be cutting another 3,000 jobs and this is on top of the earlier announced 3,700 jobs. Once this cut is completed, UBER’s total employees would drop by 25%. It is said that that will save Uber a total of US$1 billion (RM4.36 billion) in annual expenses.

BofA Securities analyst Justin Post said in a note about this announcement. “Uber continues to mature, with a more focused scope of operations and fewer non-core endeavors. We would not be surprised if Uber is looking at strategic options for Freight, despite costs cuts being still focused on selected growth initiatives. Actions such as incorporating public transit in the mobility app, and expanding Eats to ‘Delivery’ including Grocery and Direct delivery.”

CFRA analyst Angelo Zino said, “We applaud [the cost savings] as it will allow the Rides segment to be profitable at a much lower run rate.” Please do read the full and comprehensive article here: Article in marketwatch.com here.

Hopefully all these employees who lost their jobs could find one soon. Their experience working with Uber should help tremendously if they are looking for a similar job in the online industry. It’s tough for someone from the manufacturing line to jump into a job with an internet company but Uber’s employees should fit the bill for most other online companies which are still hiring. We wish them all the best and that COVID-19 deaths in the U.S. will soon be dropping tremendously.

Coming back to the SME world here in Malaysia, SMEs hires 70% of all employees in Malaysia. It contributes about 30 percent to the GDP growth every year. If we are a typical SME company which has just started, the goal is to be self-sustaining as soon as possible. Let’s understand that the business loan which we took has to be paid, right? Even assuming it was the parents who gave us the seed money or the business capital, we cannot keep going back to them every year… right?

Of course today, if we are in the online space where we are known as a disruptor (which is supposed to be great for the market) then the chances that investors will continue to invest will be there. That goal is no longer to become profitable as soon as possible but to become dominant in the market so that very soon, the company could become profitable. So, do you have any idea which could disrupt the industry, yet? Think of one, start it and make it big.

Online businesses do not have a geographical limit, generally. Oh yeah, if you happen to be the CEO of some funds looking to acquire stakes in online business, feel free to reach out to me yeah. kopiandproperty.com may be thinking of growing faster than the last 2 years too when we become a Sdn Bhd too. Not just the money part yeah, need that experience to help the growth too. As for now, just stay at home!

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