Yahoo Finance Live anchors discuss reports that Uber is cutting back on hiring and spending and the broader hiring slowdown in tech.
Video Transcript
JULIE HYMAN: We have to talk about what’s going on in the tech industry elsewhere. We’ve got a bunch of high profile companies that have been tightening their budgets, freezing hiring as the sector falls sharply from the highs of the pandemic, after the NASDAQ recorded its fifth consecutive week of declines last week, its longest losing streak since 2012.
And Uber is the latest victim in terms of tightening the purse strings. CEO Dara Khosrowshahi vowing to cut back on spending and treat hiring as a privilege. That’s according to an email obtained by CNBC. That stock, by the way, is down by over 40% year to date. It’s really interesting what we have seen, you guys, in this sector. Meta talking about not being as profligate with its hiring and now Uber as well.
BRAD SMITH: And on the Meta front, I mean, not surprising there because when we think about all of the investments that they’ve made in the Reality Labs or what that pivot may look like, perhaps that’s the most surprising part, is that they had to step off of some of those positions as quickly as they did. But that also goes to show that they wouldn’t be able to have monetized it as quickly as they had pitched to investors, quite frankly, too.
And so with that, there’s also this duty that the executives at the company have to those end investors to say, OK, well, how do we trim back, but at the same time, still make sure that we are hitting in stride towards getting towards this vision of a new reality or ecosystem or Metaverse that we have pitched to everybody that we’ve tried to break into our valuation, but the valuation sold off on.
BRIAN SOZZI: No, you make a good point. And I have an interview right now on the Yahoo Finance homepage with Reed Hoffman. It’s long, it’s winding, there’s a lot going on in it. But one comment he made to me on Meta, which was very interesting, he did mention that Zuckerberg, of course, Facebook’s founder and CEO, he might be early on the Metaverse. And that was really the first big name tech person that had said publicly that I think that has raised questions on what the Metaverse is. And perhaps Zuckerberg has invested too many billions of dollars in bringing to life this thing, whatever this thing might be.
Now, secondarily, I also like what Dara over at Uber said, too, noting that free cash flow is now the most important metric amongst these big cap tech names. And to that end, if that’s going to be the measure going forward, instead of adjusted operating profits, as Dara, right there, has been pumping in the past about a year and a half, two years, since the company went public, last year, Uber’s free cash flow, negative $3.3 billion. In the first quarter, negative $700 million. There’s no indication they will be free cash flow positive this year. And this is a big problem. So what do you do if you can’t hit those benchmarks? You can everybody.
JULIE HYMAN: Well, and not only that, so as I look at what these companies are doing, I’m thinking about the Federal Reserve a little bit. And I have to say, I have been skeptical of the Fed’s ability– and the Fed has said this itself, too– Jay Powell has said this– that their ability to hit the brakes on or fix the supply issues that are fueling inflation are limited. They can only affect the demand side of the equation. And when you talk about the demand side of the equation, one of the things they’re affecting is the demand for stocks and for risk assets.
So, yes, there are fundamental issues in Uber’s business, in Meta’s ad business, et cetera. But it’s also a terribly bad look when your stock has sold off 40% or 50% from the highs, and you’re hiring like crazy and spending lots of money. So here’s a place where the Fed can be effective in cooling down the job market and potentially cooling down inflation if you have a sort of the stock tail wagging the dog of the fundamental business, if that makes sense, at the same time that, yes, admittedly, these companies are facing challenges in their fundamental business. But if stocks are down this much, they can’t keep spending all of this money.
BRIAN SOZZI: No, and it’s just– and we’ve also left out of this equation Netflix, too, Netflix also slowing its hiring.
BRAD SMITH: You know, to the point that you were mentioning just very briefly about that interview, and if Facebook or Meta Platforms is too early to the Metaverse, I would offer this thought, too. GameStop once had Spawned Labs that they had invested heavily into. They had built out the entire reality that they would have seen in the future of cloud-based gaming and because they weren’t seeing it, revenue– monetized as quickly as they would have hoped and sold to investors.
They had to step back from that. Imagine where they would have been right now, had they been able to continue to invest into that. That’s not to say that Metaverse is the apples to apples case here, but that’s a thought that just goes through my mind here, if they could retain a lot of those people.
BRIAN SOZZI: You need to tweet that to Ryan Cohen.
BRAD SMITH: Yeah.
Source: https://ca.finance.yahoo.com/video/uber-reportedly-cutting-back-spending-141134885.html
