Uber gives up the wheel in Russian Federation, merges with rival Yandex

Yandex, a Russian tech giant with taxi operations, is taking over part of Uber's business, after the U.S. ride-hailing firm spent millions to build a presence in Russia and other countries in the region.

Yandex, the largest Russian search engine, has a large advantage in being able to use their own maps, in comparison to Uber who must source them from other companies. The remaining 4.1% will go to employees.

Uber will be making a $225 million cash investment into this new combined company. The CEO of Yandex Taxi, Tigran Khudaverdyan, will become the chief executive of the new combined company.

In 2016, Uber realized that it was outmatched by its rival in China, where it spent billions in rider subsidies trying to gain its foothold against rival Didi Chuxing.

"This deal is a testament to our exceptional growth in the region and helps Uber continue to build a sustainable global business".

After selling its Chinese business in August past year, Uber has now yielded its clout overseas again - this time to merge its Russian business with the taxi arm of Russian search engine giant Yandex.

The deal comes not long after Uber CEO Travis Kalanick, who helped found the app-based auto service in 2009, resigned amidst investor pressure.

As part of the deal, Uber will contribute its UberEATS food delivery business in the six-country region to the new venture. It will value its stake at nearly $1.4 billion. "The combined companies now perform over 35 million rides a month while growing over 400% year-over-year".

Uber is joining forces with Yandex, the so-called "Google of Russian Federation". But it offers one vision for how companies like Uber can escape the vicious cycle of competing to subsidize rides in a money-losing race to the bottom. But neither company could afford the high level of subsidies (and resulting costs from driver corruption) needed to win new drivers and riders and new markets. Once that happens, they plan to integrate their driver apps.

Given changes in the business at home - namely CEO Travis Kalanick resigning amid a host of scandals involving sexual harassment and other bad management practices - the company appears to be having a wider thinking of its overall strategy.