Uber’s hacking mess increases difficulty in company’s turnaround efforts
The appointment of Dara Khosrowshahi from Expedia as Uber CEO was expected to create a turnaround for a company meddled with issues, and being doubted for its key services.
The hack introduces an unexpected factor in negotiations between SoftBank Group Corp and Uber shareholders over a planned investment of as much as $10 billion, a deal Khosrowshahi has been championing. (File Photo)
The appointment of Dara Khosrowshahi as head of Uber Technologies Inc this summer was supposed to mark the beginning of a new chapter. The company had been racing from one disaster to the next, leading to boycotts, lawsuits, criminal probes, an executive exodus and an investor-led mutiny against the co-founder Travis Kalanick.
Somehow, the new chief executive officer keeps finding more horrors at every turn. The latest is a cyberattack Uber had been concealing since last year that exposed personal data on 57 million customers and drivers globally. The company, which said it had paid hackers $100,000 to delete the data and keep quiet, disclosed the incident in a statement to Bloomberg on Tuesday, following an investigation commissioned by the board. The chief security officer and one of his deputies were ousted for their actions following the hack.
Khosrowshahi’s role so far looks less like a turnaround artist and more like chief apology officer on behalf of his predecessor, Travis Kalanick. Since he took over, London moved toward outlawing the service, citing “a lack of corporate responsibility.” Uber is appealing. (“I apologise for the mistakes we’ve made,” Khosrowshahi said in response.) He then traveled to Brasilia to meet with officials there and ward off restrictions on Uber’s business. (“In the past, we were a bit aggressive,” he told a Brazilian newspaper.) And now the mishandled data breach. (“We will learn from our mistakes.”)
The hacking fallout has already begun. Within hours of the disclosure, a customer filed a lawsuit seeking class-action status, and New York Attorney General Eric Schneiderman launched an investigation. More states and the Federal Trade Commission, which had settled with Uber over another privacy matter in August, will probably pile on, said Jeremiah Grossman, chief of security strategy at SentinelOne Inc, which aids companies with cyber-defense. “I’m sure they’ll get another call from the FTC,” he said.
The ghosts of Kalanick’s past will scare up more problems. The hack introduces an unexpected factor in negotiations between SoftBank Group Corp and Uber shareholders over a planned investment of as much as $10 billion, a deal Khosrowshahi has been championing. It may weigh on the company’s valuation, now at about $70 billion, ahead of an initial public offering expected in 2019. And the theft of customer data offers one more reason for people to switch to Lyft Inc, which was quickly gaining market share in the US before expanding to Canada this month, or another local ride-hailing app.
Khosrowshahi’s role so far looks less like a turnaround artist and more like chief apology officer on behalf of his predecessor, Travis Kalanick. (Image Source: Bloomberg)
The breach at Uber, while significant, is smaller than recent incidents at Yahoo or Equifax Inc, but the decision to keep it a secret for a year was particularly concerning. Cybersecurity experts said Uber’s payment to the two hackers in exchange for their discretion and assurances that they delete the data was very unusual. “I was shocked,” said Kowsik Guruswamy, chief technology officer at Menlo Security Inc. “Companies need to own up.”
Experts also questioned whether Uber was able to verify the information was truly out of the attackers’ hands. “What guarantee or promise did they have that they deleted this data and didn’t make a backup?” Guruswamy said. “It sounds to me like the $100,000 went, not to protect the consumers, but to keep it from getting out in the news.” Khosrowshahi said in an emailed statement that Uber secured its systems and implemented new security measures after the attack. “While I can’t erase the past, I can commit on behalf of every Uber employee that we will learn from our mistakes,” he said.
Besides the hack, there are numerous past indiscretions from Kalanick’s tenure that will haunt his successor at Uber. The US has opened at least five criminal probes into possible bribery, illicit software, questionable pricing schemes and theft of a competitor’s intellectual property, people familiar with the matters have said. The San Francisco-based company also faces dozens of civil suits, including a high-profile case from Alphabet Inc set for trial next month.
Before the board selected former Expedia Inc CEO Khosrowshahi in August, Meg Whitman was a finalist for Uber chief. In a coincidentally timed announcement shortly before Uber’s hacking disclosure Tuesday, Whitman said she was stepping down as head of Hewlett Packard Enterprise Co. Perhaps she should now consider herself lucky to be passed over for the Uber job.
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