Uber's CEO said that it could be profitable — it just doesn't want to be right now
- Uber CEO Dara Khosrowshahi said that the business could be profitable if it stopped operating in new markets and its research divisions.
- Khosrowshahi said choosing to become profitable would sacrifice growth and innovation.
- Operating at a loss makes Uber's CEO "intensely uncomfortable," but he said it was the right thing to do.
According to Uber CEO Dara Khosrowshahi, the company could be profitable if it cut expensive parts of its business such as operating in developing markets and autonomous vehicle research.
"I'm pretty darn confident that we can turn the knobs to get this business, even on a full basis, profitable if we wanted to," Khosrowshahi said at the Goldman Sachs Technology and Internet Conference in San Francisco, "but you would sacrifice growth and you would sacrifice innovation in an enormous category."
"Where we are now as of Q4 is the developed markets, the contribution from the developed markets, essentially pays for the overhead of the business, alright," Khosrowshahi explained.
"Now, I include two things. And they're a lot of money for those two things: One is the amount that we are investing in developing markets, that's a significant negative but that is an optional investment for us. By the way, we think it should be on, it's going to be on for a while, right? That gets us negative," he said. "And the big bets, autonomous etcetera also increase the negative. But if you just said, if someone says, 'Forget about all this stuff, all I want is the core and just sell all the stuff or stop investing all the stuff,' you would have a business that for a quarter was cash flow breakeven."
The CEO explained that he hopes to be able to show investors a route to profitability ahead of Uber's upcoming IPO.
"That comes from a person who has run a profitable company for 13 years so all of this makes me intensely uncomfortable," he said. "But it is the right thing to do, and the important thing is we do have the dials, we've got the dials in this business, and right now, because the opportunity is so big, we're dialling pretty aggressively."
"We're not at an 11. We're at a nine. But that's because we should and by the time, hopefully, we're in 2019 and we're getting ready for an IPO, I think that we will clearly be able to show investors either a path to profitability or core markets that are quite profitable, or we can get there and it's only a question of what's the opportunity is set and how much you should be investing to get to that opportunity."
It might sound strange that a business would intentionally avoid being profitable, but it's a common business decision in the world of technology where growth is often valued more highly than profit. Amazon, for example, intentionally avoids profitability, and prefers to spend money on growth to expand into new markets.
The settlement with Waymo was 'worthwhile'
Elsewhere in his on-stage interview, Khosrowshahi talked about Uber's recent settlement with Alphabet's self-driving car company Waymo.
"It was a very, very significant distraction for the teams that were working on our autonomous technology, and I'd say it was not only a distraction but it was a personal affront," he said.
"These are scientists who have cars and transportation and autonomy in their blood, many of them have dedicated their entire professional career on this quest, and it's gone from ... a crazy dream to something that's going to get real."
He added: "I think that this was a distraction and it also put their really good work under a question mark, and a pretty significant question mark."
The $245 million (R2.8bn) settlement's role in putting the case behind Uber and "normalizing relationships with Alphabet, Google" made it "well worthwhile," he said.