Magic Leap Hit With Layoffs In Shift to Enterprise Business

Rony Abovitz - H - 2016

Magic Leap — the augmented reality developer that generated overwhelming hype when it entered the startup scene in 2014, raising $2.6 billion from investors including Warner Bros. and Legendary — on Wednesday announced layoffs and a strategy to focus on enterprise clients, rather than consumers.

The tech developer didn’t reveal the number of employees affected by the layoffs, though a Bloomberg report suggested it numbered roughly 1,000, or half of the company’s workforce. In a memo from CEO Rony Abovitz, posted Wednesday on the company website, the exec described the layoffs as "a painful process" that was “ultimately necessary to give us the best chance for future success. These changes will occur at every level of our company, from my direct reports to our factory employees.”

This followed reports last month that the company was considering a sale.

Magic Leap skeptics have viewed Magic Leap 1, its first AR headset, which takes advantage of developments in spatial computing, as over-hyped and underwhelming. But the ambitious vision and promise of Magic Leap that excited investors extends to citywide use that will require 5G bandwidth and latency that isn't yet widely available.

"The recent changes to the economic environment have decreased availability of capital and the appetite for longer term investments," wrote Abovitz in his memo. "While our leadership team, board, and investors still believe in the long-term potential of our IP, the near-term revenue opportunities are currently concentrated on the enterprise side."

The exec also wrote that the company is “in the process of negotiating revenue generating strategic partnerships that underscore the value of Magic Leap’s technology platform in the enterprise market. … This transformation also means that we must decrease investments in areas where the market has been slower to develop.”

Added Abovitz, "The post-COVID economy will be one of resiliency and the ability for businesses to operate across vast distances and connect with their customers in ways that mimic physical interactions, but benefit from the speed and scale of high-speed networks, will be critical. Spatial computing will very much be part of that coming economic change."