GLOBAL DOMINATION PLANS THWARTED?
Uber gives up the wheel in Russia, merging with rival Yandex
Hitting yet another major pothole on its road to global domination, Uber on Thursday ceded control of the Russian market in a merger with rival Yandex.
The two will create a yet-tobe-named company worth $3.7 billion, with Yandex having majority ownership, the firms said Thursday. Uber will hold three of the seven board seats, control less than 40 percent of the company and defer to the Yandex CEO, relegating the San Francisco-based ride-hailing startup to a back-seat role in one of its biggest markets outside the U. S. The move comes almost exactly a year after Uber sold its business in China to rival Didi Chuxing, raising the question of whether Uber is scaling back its expensive international ambitions as it struggles to become profitable and eyes a future IPO.
Despite Uber’s assertion that the deal is “a testament to our exceptional growth in the region,” tech analyst Jan Dawson of Jackdaw Research said in reality, Uber is conceding defeat in Russia.
“It feels like it’s part of perhaps a deliberate strategy, a de- liberate refocusing on markets where Uber really feels like it can take the market share it needs to in order to make its business model work,” Dawson said. “That’s probably all a sign that Uber is trying to work toward shrinking it’s losses and eventually becoming profitable.”
Uber’s losses, while still massive, are declining. The com-
pany confirmed to this news organization that it lost $708 million over the first three months of this year, compared to $991 million the quarter before.
Meanwhile, Uber also is scrambling to salvage its tarnished image following months of scandals that forced CEO Travis Kalanick to resign in June. The company is battling a lawsuit that claims it stole key self-driving car technology from Google’s Waymo, and recently fired 20 employees after an investigation into sexual harassment and other unprofessional workplace conduct.
But if the Yandex merger is indeed a failure for Uber, it’s a “really pleasant failure,” Dawson said. The company has invested roughly $170 million in the region over the past three years, and is pouring an- other $225 million into the merger. In exchange, Uber walks away with a stake in the new company worth almost $1.4 billion.
“Ultimately it looks like a really good deal,” Dawson said.
The Yandex-Uber partnership will serve ride-hailing passengers and UberEats customers in Russia, Azerbaijan, Belarus and Kazakhstan. The company also will stretch into Armenia and Georgia, where Uber does not currently operate.
Yandex, which is investing $100 million into the joint venture, will control 59.3 percent of the company, leaving Uber 36.6 percent. Employees will own 4.1 percent. The company, currently being referred to as “NewCo,” will be run by Yandex CEO Tigran Khudaverdyan.
The merger with Yandex mirrors an earlier deal — Uber last August hit the brakes in China, selling its business in that massive market to arch rival Didi Chuxing after losing $2 billion during the two years it operated in the country. Uber received a 20 percent stake in Didi, the value of which has jumped from around $6 billion to more than $8 billion in the past year, Uber said. Didi now is worth $50 billion, according to venture capital database CB Insights, making it the world’s second-mostvaluable private company — right behind Uber.
Yandex already dominates the Russian market, giving 285 million rides a year. Uber gives 134 million rides a year, according to a presentation for investors the two companies made public Thursday.
“As shareholders in our company, all of us should be incredibly excited about this next stage,” PierreDimitri Gore- Coty, Uber’s head of business in Europe, the Middle East and Africa, wrote in an email to company employees, which was posted on Uber’s blog Thursday morning.
For now, the Uber and Yandex apps will continue to function under their own brand names, while the driver apps will be combined once the deal closes — probably in the fourth quarter of this year, if it’s approved by regulators. All full-time Uber employees in the Russia region will become part of the new company. And, under the agreement, Yandex users traveling elsewhere in the world will be able to use their Yandex app to hail an Uber.
In a conference call with reporters Thursday, Yandex CEO Khudaverdyan said he’s excited to lead the new company.
“My goal will be the smooth integration of the team,” he said, “as we look to build the platform that will make ride-sharing incredibly convenient and ubiquitous.”