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posted by chromas on Tuesday March 26 2019, @03:03AM   Printer-friendly

Reports: Uber Set To Buy Careem For $3.1B

Uber Technologies' long-rumored purchase of Dubai-based rival Careem could close this week, according to reports citing "people with knowledge of the matter."

The fact that Uber may buy Careem isn't surprising. Crunchbase News reported last September that the deal between the ride-hailing competitors might take place. What is a little unexpected is the currently-expected purchase price.

In September, a buyout was said to value Careem at $2 billion to $2.5 billion. But now, per Bloomberg, Uber is expected to pay $3.1 billion for the company with a mix of cash ($1.4 billion) and convertible notes ($1.7 billion). The notes will be convertible into Uber shares at a price equal to $55 per share, according to the term sheet seen by Bloomberg.

[...] The Careem deal, if consummated, could help Uber's short-term growth rate. As we've reported recently, Uber has seen its growth rate, as measured in percentage terms, decline. While the company remains stiffly unprofitable, slowing growth could prove difficult to square with the valuation it covets.

Careem.

Also at Reuters and Engadget.


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  • (Score: 2, Disagree) by drussell on Tuesday March 26 2019, @03:20AM (8 children)

    by drussell (2678) on Tuesday March 26 2019, @03:20AM (#819887) Journal

    Focusing mainly on short-term growth is probably the leading cause of longer-term severe corporate blunders, often leading to eventual oblivion.

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  • (Score: 5, Interesting) by c0lo on Tuesday March 26 2019, @04:35AM (7 children)

    by c0lo (156) Subscriber Badge on Tuesday March 26 2019, @04:35AM (#819930) Journal

    Short-term growth

    Paradoxically, the above does not apply to Uber. Be it a valid business plan, a wild bet with a $90B stake or a fucking giant swindle, one have to give Uber that cash burning for 9 years doesn't quite fit in the "short term growth" description.

    Currently, they are burning through investors' cash for market dominance.

    Depending who you believe, it can be:

    • a Good Thing™ [ccn.com]

      The 2017 and 2018 “losses” aren’t because of bad business. They show a very well-positioned high tech monopoly looking ahead and fearlessly sacrificing profits for growth.

    • or a Bad Thing™ [nymag.com]

      The notion that Uber, the most highly valued private company in the world, is a textbook “bezzle” — John Kenneth Galbraith’s coinage for an investment swindle where the losses have yet to be recognized — is likely to come as a surprise to its many satisfied customers. But as we’ll explain, relying on the extensive work of transportation expert Hubert Horan [ssrn.com], Uber’s investors have been buying your satisfaction in the form of massive subsidies of services. What has made Uber a good deal for users makes it a lousy investment proposition.
      ...
      Uber has never presented a case as to why it will ever be profitable, let alone earn an adequate return on capital. Investors are pinning their hopes on a successful IPO, which means finding greater fools in sufficient numbers.
      Uber is a taxi company with an app attached. It bears almost no resemblance to internet superstars it claims to emulate. The app is not technically daunting and and does not create a competitive barrier, as witnessed by the fact that many other players have copied it.

    One on top of the other, the Achilles' heel for Uber is the presence of any significant competition where it operates. As the "Good thing™" link above puts it

    With its size, brand value, and ability to haul cash, Uber actually wouldn’t be doing itself any favors if it didn’t throw its weight around to quash the ambitions of much smaller competitors with vastly smaller economies of scale and capitalization.

    They won’t be able to withstand such relentless competition from a far more resourceful rival, as customers scoop up the savings of Uber’s loss leader offensive.

    And that is the explanation for the recent acquisition.

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    • (Score: 4, Interesting) by takyon on Tuesday March 26 2019, @05:19AM (6 children)

      by takyon (881) <reversethis-{gro ... s} {ta} {noykat}> on Tuesday March 26 2019, @05:19AM (#819956) Journal

      The transition to driverless will be crucial. Suddenly instead of having its contractor peons handle the fares, Uber will need to maintain its own fleet of vehicles.

      Google/Waymo has been buying tens of thousands of vehicles for this purpose, and is building a driverless car factory. Lyft and others will also compete.

      These companies will start out in cities/regions and expand from there. But many billions will need to be spent. Google probably has the cash to do it, and their vehicles have driven many more miles in autonomous mode.

      Waymo moves into a new city. Either Uber has to try to compete with human drivers, or launch its own driverless service in that city. They'll have to burn investors' cash all over again. Good luck.

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      • (Score: 2) by c0lo on Tuesday March 26 2019, @05:40AM (1 child)

        by c0lo (156) Subscriber Badge on Tuesday March 26 2019, @05:40AM (#819970) Journal

        The transition to driverless will be crucial.

        As a matter of opinion, the above statement lacks the "if it happens soon enough for Uber".

        As a matter of my personal opinion, I'd rather put it as "if it happens before everything goes bellyup, this is la-vie-en-rose SciFi while the world is hurling towards a dystopian style of SciFi" (which implies "on my personal opinion, the NN multi-factor correlation engine we call AI today can't support the proper level of AI for a driverless car on today's EE technology and I don't expect computing architectures paradigms at commodity priceless any time soon")

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      • (Score: 2) by bob_super on Tuesday March 26 2019, @05:00PM (3 children)

        by bob_super (1357) on Tuesday March 26 2019, @05:00PM (#820170)

        Driverless cars are far from cheap.
        Owning the cars is a major change in the cost structure for Uber.

        "we're bleeding money and could lose many customers if we stopped subsidizing rides below costs, but if our murderous tech catches up, and gets approved for deployment by hundreds of agencies, we can spend billions in depreciating assets to reduce one cost center, and then we're totally gonna be worth the insane valuation you morons are giving us".

        • (Score: 2) by takyon on Tuesday March 26 2019, @06:13PM (2 children)

          by takyon (881) <reversethis-{gro ... s} {ta} {noykat}> on Tuesday March 26 2019, @06:13PM (#820204) Journal

          I think Google has a good chance of doing it, and Uber would have to respond if Waymo fares ended up being something like 20-50% of what Uber/taxi fares are. The response could cause Uber to completely unravel, run over more pedestrians, etc.

          Waymo Orders Thousands More Chrysler Pacifica Minivans for Driverless Fleet [soylentnews.org]
          Turn Your Conventional Car Into a Driverless One for 10 Grand [citylab.com]

          I think it's reasonable to say that the driverless sensor suite will add around $10,000 to the cost of the vehicle. Driverless vehicles used by Waymo will all be electric. A $50,000 price for 1 vehicle is my guess. $1 billion would get you 20,000 vehicles, although you would still need charging stations, maintenance/parking centers, etc.

          Uber has something like 750,000 to 1 million drivers in the U.S. Google could do the work of that entire driver pool using less driverless vehicles, since they might be on the road 22-24 hours per day. There's also no need for Google to handle Uber's entire fare load instantly. They are building from the ground up and can expand region to region, city to city. They may stick to major population centers initially, and only expand outwards to smaller cities later. So Google can spend $5 billion to get 100,000 vehicles, or maybe $12.5 billion to get 250,000 vehicles. Increase the number to account for various costs.

          To get $7.5 billion revenue out of 100k cars in 3 years, each car would have to collect $25,000 in fares annually. Driverless fares could be $0.35/mile [marketwatch.com], compared to $1-2 for Uber/Lyft [ridester.com]. So each car has to drive around passengers for around 72k miles per year, about 200 miles per day. If the cars are fully utilized nearly 24/7, then each would need to pick up less than 2 customers per hour (average trip distance is about 6 miles [ride.guru]). You could make things even easier on Google here by increasing the fare to $0.50/mile, which could go down later.

          It seems plausible. Google has put in a good amount of R&D over many years now, and just needs to lay down the cash. They have 100% of the cash needed to get started. The amount needed will probably be far less than what would have been needed to make Google Fiber a nationally competitive ISP.

          Google has another way to generate revenue from these cars. Don't forget that they are an advertising [futurecar.com] company...

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          • (Score: 2) by bob_super on Tuesday March 26 2019, @06:45PM (1 child)

            by bob_super (1357) on Tuesday March 26 2019, @06:45PM (#820219)

            Somehow, I think $0.35 per mile is optimistic, considering real-life maintenance, wasted miles going between fares, and just the silly fact that people putting down actual billions to buy those assets rarely have the patience to wait 5 years to see a tiny ROI.
            They'll charge a buck or two, probably two bucks with some kind of "discount" until people don't pay attention.

            • (Score: 2) by takyon on Tuesday March 26 2019, @07:17PM

              by takyon (881) <reversethis-{gro ... s} {ta} {noykat}> on Tuesday March 26 2019, @07:17PM (#820239) Journal

              Not competing on price? Tough sell for a service that you have to download a new app for, and is newfangled driverless.

              I'll give you $0.75/mile, which would still be a substantial improvement in many cases. Where it could really matter are cities where surge pricing multiplies the cost of your trip.

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