With Waymo Settlement, Uber CEO Clears the Way for Company’s Future
It’s a paradox: How can paying a quarter of a billion dollars to a rival and issuing an apology be considered a win?
But when Uber CEO Dara Khosrowshahi agreed to an all-stock settlement with Waymo over its bitter trade-secrets lawsuit against his company, he notched another victory for his cleanup campaign, observers said.
“This was one of the biggest clouds hanging over Uber’s head,” said Bradley Tusk, an early Uber investor and consultant. “It didn’t burst into a thunderstorm, and now it’s gone.”
Since joining Uber in late August, Khosrowshahi has been trying to wipe the slate clean from a scandal-plagued year as he prepares the world’s most valuable startup for a potential public offering on Wall Street in 2019.
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Waymo, the self-driving unit of Google parent Alphabet, said Uber had stolen crucial self-driving secrets from it — something Uber denied throughout the case, including in the settlement. The yearlong case was a distraction, a morale drain and an embarrassment to Uber. Waymo’s lawyers dug up dirt on the ride-hailing company, with revelations that it used underhanded tactics to spy on competitors.
In one of the many apologies he’s made since taking the helm, Khosrowshahi said Uber would henceforth eschew such tactics. His stream of apologies have addressed Uber concealing a huge data breach, accusations of a toxic work culture, and safety issues in London that led to it being banned there, among other issues.
But the trade-secrets lawsuit stood out because of the potential for Uber to pay well north of a billion dollars and see its work on self-driving cars, which it considers critical to its future, hobbled.
“Waymo may be one of the most expensive and high-profile cleanups, for Dara, but it’s part of turning his attention to the future and not focusing on the past,” said Eric Goldman, a law professor at Santa Clara University.
That future needs to include a public stock offering so Uber’s backers can see a return on their multibillion-dollar stakes in the company, which is far from turning a profit.
“Uber now has to show they can make good on bigger promises about their ability to be a global provider,” said Max Wolff, chief economist at the Phoenix Group, a technology advisory company.
Khosrowshahi already placated Uber’s Increasingly irate backers — who in June organized a palace coup to oust co-founder Travis Kalanick as CEO — by arranging a $10 billion investment from Japanese conglomerate SoftBank that allowed early shareholders to cash out.
“SoftBank obviously was important for Uber to gain stability and trust, and to provide liquidity to investors,” said Tusk, who liquidated about half of his Uber holdings, which were worth about 250 times more than when he got them starting in 2011 in trade for consulting work at the brand-new startup.
“Uber used to be all about brash aggression, act first and ask for forgiveness later, and management be damned,” Wolff said. “At some point investors get sick of hearing about the things that go wrong with that.”
Khosrowshahi even may have gained an ally. Google, which invested $258 million in Uber in 2013, once had a cordial relationship with the ride-hailing company, as Kalanick recounted somewhat wistfully on the witness stand, saying he had hoped the two would join forces on a robot-taxi service. Alphabet also led a $1 billion investment in Uber rival Lyft in October.
Khosrowshahi was well poised to mend the relationship: As CEO of Expedia, he navigated an at-times tense relationship with Google, making sure the online travel agency’s flights and hotel rooms were visible in its search results.
“Normally when you have a strategic investment, the parties are friendly,” Goldman said. “Is this the era of a new detente where they can find a way to collaborate instead of tearing each other down?”
Jim Scheinman, a partner at Maven Ventures, which has stakes in several self-driving companies, including Cruise, a self-driving rival to Waymo and Uber now owned by General Motors, saw the face-saving settlement as a smart move by Khosrowshahi and good deal for both parties, but especially for Uber’s robot-car program.
“Now they can focus on their work without this distraction hanging over them,” he said. “And it might be helpful to attract engineers to work there. They were losing a lot of people.”
