Lyft to suspend some hiring and cut budgets, citing economic downturn

It will slow hiring, cut budgets for some of its divisions, grant new stock options to some employees to offset share price erosion, and join the competition.

Chairman John Zimmer announced the measures Tuesday in a memo to staff.

Mr. Zimmer wrote in an internal memo seen by The Wall Street Journal.

“Given the slower-than-expected recovery and the need to accelerate leverage across businesses, we have made the difficult but important decision to significantly slow U.S. hiring,” he said. he declares.

This includes prioritizing the company for fewer initiatives, not filling many existing vacancies, and focusing on hiring positions deemed critical, such as those that support its core constituency business. He said there were no plans to lay off workers.

A person familiar with the meeting said Lyft’s board of directors met on Friday to discuss the cuts. Another familiar person said that Lyft had recently started sending signals to some employees that there would be a slowdown in hiring and budget cuts.

Lyft shares are down more than 60% year-to-date, more than double the decline of the Nasdaq Composite Index. After falling more than 15% on Tuesday, Lyft shares rose less than 1.5% in post-close trading after the newspaper announced the plans.

Uber Technologies has also identified budget cuts. Uber driver in Paris.

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Tech companies that have supported the US economy during the pandemic are suffering from punitive expansion. concerns about high interest rates The reversal of some of the epidemiological trends that have boosted tech returns has affected stock prices

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Amazon reported its slowest quarterly revenue growth in nearly two decades last month. Netflix lost subscribers in the first quarter for the first time in more than a decade and said the losses would continue.

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He warned that the resurgence of Covid-19 in China could hamper sales.

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Down 43% on Tuesday After saying in Monday’s filing that adjusted revenue and pretax profit for the second quarter will be below the range the company expected about a month ago due to weak ad revenue . Other tech stocks that rely on digital advertising, including the father of Google

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After years of rapid job creation, some tech companies have announced they believe it’s time to take a more cautious approach. The slowdown of the tech giants raises questions about the general direction of the labor market and the economy in the United States.

Meta, Peloton and Uber are among the tech companies he announced. It will either slow recruitment or reassess its workforce in recent weeks.

Other issues cooling the long-heated sector include inflation, labor shortages and supply chain issues.

Uber and Lyft have been struggling with driver shortages for a year. This pushed prices to record highs. Rising prices partly led to fewer Lyft riders and Uber rides than before the health crisis, even as both companies’ first-quarter revenues topped pre-pandemic levels due to the price increase.

Lift First-quarter results eclipsed With a weaker-than-expected earnings outlook as the company said it would have to spend more money to entice drivers back. Its stock plunged more than 35% after the announcement, posting its biggest one-day percentage drop since the company went public in 2019.

Earlier this month, Uber said it would cut marketing spend and hire less because it’s focused on making a profit.

Both companies have spent a lot of money for years to gain customers and market share. But public performance in 2019 was a disappointment, with Wall Street increasingly keen to see money-losing companies turn a profit.

“As we have seen and discussed, public markets investors have continued to focus heavily on a potential recession and near-term corporate profitability,” Zimmer wrote in a note Tuesday.

He went on to write that “the near-term business plan will focus on accelerating earnings – whether we like it or not, that’s the ticket for the market today.”

Uber and Lyft cut losses, offloading expensive divisions such as self-driving units and staff cuts during the health crisis. Both companies reported quarterly adjusted earnings before certain expenses such as interest, taxes and amortization over the past year.

Uber said it expects cash flow to be positive on an annual basis this year. If it achieves this goal, it will be the first time that the giant’s core business of combined transport and food delivery will generate more money than it spends.

write to Pritika Rana at [email protected] and Emily Glazer at [email protected]

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