By Jim Lundy
(Aragon Research) – Yesterday, Uber announced its new CEO Dara Khosrowshahi, who has been running and growing Expedia for a number of years. Khosrowshahi will now be challenged with fixing the multitude of problems currently plaguing Uber. However, he wasn’t the board’s first pick. To us, this reinforces what others have speculated—the Uber Board could not come to agreement on picking a CEO.
This blog is about the challenges Uber faces and why Meg Whitman would have made a better pick as CEO.
Dara Khosrowshahi’s Tenure Will Be Short
Benchmark, the VC firm who owns a majority of Uber Stock, cannot be happy with this outcome. Their pick was Meg Whitman. She wanted more control and less board oversight. Travis Kalanick, the ousted Uber CEO, did not. Because of this tension, our take is that Khosrowshahi’s tenure will be short – he will be gone in less than 24 months.
Moreover, given all of Uber’s litigation with government entities, Uber could have greatly benefitted from Meg Whitman’s experience in navigating government.
Uber Cleanup Will Not Be Easy
One of the biggest issues facing Dara Khosrowshahi is fixing all of the broken culture and regulatory issues that Uber is currently challenged with. Employee moral is low; female associates were getting harassed, and Uber is battling daily with governments around the world. This is a lot more than an online business.
Meg Whitman’s experience of doing a cleanup at HP gives her the clear advantage.
Advantage: Meg Whitman
Uber Litigation with Google’s Waymo Unit Is Ugly
In addition to governments, Uber has a trade theft case pending with Google subsidiary Waymo. This one is ugly and it needs to go away. It could really bog down Khosrowshahi, who has little experience here. Our take is that Whitman would make this go away quickly. She would meet with Eric Schmidt and this would be settled out of court.
Advantage: Meg Whitman
Benchmark vs. Kalanick: Benchmark Will Win
VCs usually win the day—because they have the money. Benchmark is currently suing Travis Kalanick for breach of contract, which makes this an even uglier situation inside the Uber Board. Nonetheless, Uber will need more money and many other VCs will be reluctant to invest in this mess. Choosing Khosrowshahi was a compromise—it won’t last. More things will continue happen, with the biggest being removing Kalanick from the Uber Board.
Advantage: Benchmark
Bottom Line
Uber is a mess, and it’s a cleanup job with multiple dimensions. To salvage Uber, the Board needs to stop fighting and start operating, and that means Kalanick has to go. Until that happens, Khosrowshahi will have to lead the company amidst disharmony.