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Uber layoffs show a company in dire trouble

We'll see how dire Thursday.

Ride-hailing from a smartphone

Uber reports first-quarter earnings Thursday, where the scale of disruption will become clear.

Photo: Priscilla Du Preez/Unsplash

Uber just laid off 3,700 people, around 14% of its total workforce. In a note to staff, CEO Dara Khosrowshahi said the layoffs were in the "Community Operations" (that's customer and driver support) and recruiting divisions, which have become less necessary now that ride volume has plummeted.

Khosrowshahi called the layoffs "one part of a broader exercise to make … difficult adjustments to our cost structure."

The scale of the cuts underlines how badly Uber's been hit by the crisis. On Jan. 1, analysts expected Uber to bring in $4.41 billion in revenue for Q2 2020, according to Koyfin data. They now expect just $2.34 billion.

Uber reports first-quarter earnings Thursday, where the scale of disruption will become clear.

Wedbush analysts forecast a 38% year-on-year drop in monthly active users for Q1, thanks to the company's exposure to Europe and Asia, which coronavirus affected before the U.S. And "given Uber's greater exposure to business and airport travel use cases," the analysts expect a 41% year-on-year drop in Rides revenue.

Uber Eats could have been the company's saving grace, with millions of people turning to takeout as restaurants shut. But it looks set to offer little solace, thanks to the sheer amount of competition in the market: Heavy discounting has hit delivery margins and sparked price wars, while regulation has capped commissions in some markets.

But the worst is yet to come. Though the first quarter was bad, analysts expect even worse results for Q2: Wedbush thinks Rides revenue could contract by 69% year-on-year, with a 66% fall for Lyft. And with the pandemic set to linger, "it's going to be a very, very long time before either one of these companies sees any kind of a pickup," said BK Asset Management's Boris Schlossberg.

This story will be featured in Protocol Index on Thursday, our daily guide to the business of tech. Sign up to get Index in your inbox each morning.

Microsoft wants to replace artists with AI

Better Zoom calls, simpler email attachments, smart iPhone cases and other patents from Big Tech.

Turning your stories into images.

Image: USPTO/Microsoft

Hello and welcome to 2021! The Big Tech patent roundup is back, after a short vacation and … all the things … that happened between the start of the year and now. It seems the tradition of tech companies filing weird and wonderful patents has carried into the new year; there are some real gems from the last few weeks. Microsoft is trying to outsource all creative endeavors to AI; Apple wants to make seat belts less annoying; and Amazon wants to cut down on some of the recyclable waste that its own success has inevitably created.

And remember: The big tech companies file all kinds of crazy patents for things, and though most never amount to anything, some end up defining the future.

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Mike Murphy

Mike Murphy ( @mcwm) is the director of special projects at Protocol, focusing on the industries being rapidly upended by technology and the companies disrupting incumbents. Previously, Mike was the technology editor at Quartz, where he frequently wrote on robotics, artificial intelligence, and consumer electronics.

Why gig companies should be scared of a Biden administration

A divided government wouldn't stop Biden from classifying gig workers as employees. Here's how it could happen.

Biden officials are likely to try to force companies like Uber and Lyft to pay their drivers federal minimum wage and empower gig workers to unionize.

Image: Dan Gold/Unsplash

Forget regulating Big Tech: Gig economy companies could face the industry's most aggressive government regulation during a Biden administration.

Tech lobbyists and labor experts told Protocol that gig companies are gearing up for an expensive, existential battle with the Biden administration. They know that an antagonistic Biden Labor Department has the ability to override state efforts to limit gig workers' rights, and experts described to Protocol how that could play out.

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Emily Birnbaum

Emily Birnbaum ( @birnbaum_e) is a tech policy reporter with Protocol. Her coverage focuses on the U.S. government's attempts to regulate one of the most powerful industries in the world, with a focus on antitrust, privacy and politics. Previously, she worked as a tech policy reporter with The Hill after spending several months as a breaking news reporter. She is a Bethesda, Maryland native and proud Kenyon College alumna.

Power

Sonos CEO Patrick Spence: There’s money in ad sales for us

The smart speaker maker adds in-house ad sales as radio service continues to grow.

"Given the kind of customer base that we have and given the adoption we've seen in Sonos Radio, there's absolutely advertising revenue there," Patrick Spence says.

Photo: Andrej Sokolow/Picture Alliance via Getty Images

Sonos is doubling down on its efforts to monetize services on its platform, and is now looking to build out an in-house ad sales team for its free Sonos Radio service. Sonos CEO Patrick Spence confirmed the news in a conversation with Protocol on Wednesday, saying that in-house ad sales could help the company attract the right kind of brand advertisers to its platform. "Given the kind of customer base that we have and given the adoption we've seen in Sonos Radio, there's absolutely advertising revenue there," he said.

Spence made these remarks ahead of the release of the company's fiscal Q4 2020 earnings results. The company grew its revenue 16% year-over-year, to the tune of $339.8 million for the quarter. Earnings per share came in at $0.15, ahead of the $0.02 that analysts had expected. The company added 1.8 million new households to its customer base in its fiscal 2020, and close to 11 million households now own Sonos products, with an average of 2.9 Sonos products in each of those households.

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Janko Roettgers

Janko Roettgers (@jank0) is a senior reporter at Protocol, reporting on the shifting power dynamics between tech, media, and entertainment, including the impact of new technologies. Previously, Janko was Variety's first-ever technology writer in San Francisco, where he covered big tech and emerging technologies. He has reported for Gigaom, Frankfurter Rundschau, Berliner Zeitung, and ORF, among others. He has written three books on consumer cord-cutting and online music and co-edited an anthology on internet subcultures. He lives with his family in Oakland.

Politics

You may not know these tech Democrats. Now you need to.

These are the people who will be at the frontlines of the tech industry's efforts to influence an entirely new Washington.

Airbnb's Chris Lehane, Amazon's Jay Carney, Apple's Lisa Jackson and Uber's Tony West are tech Democrats you need to know now that Joe Biden is president-elect.

Image: Pupkin8r /Protocol

Now that Joe Biden has been elected to the presidency, it's time to update your contacts.

We're entering a new phase in Washington, and that means there are new power players who merit attention. Over the coming months, tech Democrats with ties to Bidenworld will help shape the future of the industry, one friendly phone call at a time.

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Emily Birnbaum

Emily Birnbaum ( @birnbaum_e) is a tech policy reporter with Protocol. Her coverage focuses on the U.S. government's attempts to regulate one of the most powerful industries in the world, with a focus on antitrust, privacy and politics. Previously, she worked as a tech policy reporter with The Hill after spending several months as a breaking news reporter. She is a Bethesda, Maryland native and proud Kenyon College alumna.

Power

Investors didn’t like Ubisoft and Activision’s earnings

Both stocks plunged on the companies' forecasts.

The outlook is good for console manufacturers, but not so much on the software side.

Image: Protocol

Big Tech companies weren't the only ones reporting earnings this week; some of the biggest players in the gaming industry were, too. And there was a sharp divide: While the outlook's good for console manufacturers, things are less peachy on the software side.

Sony and Microsoft both reported earlier in the week, and both companies' gaming divisions had pretty good quarters. While PS4 sales dropped, unsurprisingly, software and subscription revenue soared. And an optimistic outlook for the PS5 — Sony's hoping to sell 7.6 million by the end of March — and the subscription and software sales that should entail, led Sony to raise its full-year operating income forecast by 13%.

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Shakeel Hashim

Shakeel Hashim ( @shakeelhashim) is a growth manager at Protocol, based in London. He was previously an analyst at Finimize covering business and economics, and a digital journalist at News UK. His writing has appeared in The Economist and its book, Uncommon Knowledge.

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