Magic Leap Cuts Half of Jobs In Major Restructuring

(Bloomberg) --

Magic Leap Inc., the augmented-reality startup that raised more than $2 billion from high-profile investors including Alphabet Inc. and Alibaba Group Holding Ltd., is cutting about half of its workforce as part of a major restructuring, according to people familiar with the matter.

About 1,000 employees will be affected, the people added. The company is planning to wind down its consumer business and will instead focus on its enterprise products, the people said, asking not to be identified because the matter is private.

The decision to abandon its consumer ambitions represents a dramatic retreat for a company that was at one time seen as the future of at-home augmented reality.

“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,” Chief Executive Officer Rony Abovitz said in a statement posted on the company’s website, confirming the earlier Bloomberg News report.

Abovitz said that the company made “the difficult decision to lay off a number of employees across Magic Leap,” without elaborating on numbers.

“These changes will occur at every level of our company, from my direct reports to our factory employees,” he said.

Magic Leap’s board is also considering taking on new outside investment as well as a partnership with a large health-care company, the people added.

Abovitz said 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.”

Magic Leap had been working with advisers on strategic options and sounding out deals that could have valued it at more than $10 billion, Bloomberg News previously reported.

Efforts to command that high a valuation faltered after global economies ground to a halt amid the spread of the coronavirus, the people said.

The Plantation, Florida-based company had already started to shift its strategy to selling its products to large companies in the health-care, industrial and financial sectors after slower-than-expected consumer adoption of the head-set it developed.

The cuts make Magic Leap the latest technology startup to shrink its workforce during the coronavirus pandemic that has seen tens of thousands of workers lose their jobs across the sector.

An estimated 273,083 employees were let go at 285 startups since March 11. That figure comes from Layoffs.fyi, a tracker that measures publicly announced job cuts. The actual total is likely far higher because not all companies have made public announcements.

A representative for Magic Leap declined to comment on further details.

Magic Leap lured investors with a promise to create a headset using spatial computing technologies that offer consumers high-end augmented reality experiences and tools to support remote working. Many big companies have been chasing the same technology, including Microsoft with its HoloLens device.

Magic Leap, founded in 2011, unveiled a $2,300 headset in 2018 after years of secretive work and has pledged to deliver technology rivaling television or the telephone in societal impact. Sales never took off and there were dozens of job cuts late last year, The Information previously reported.

Among the company’s other big name investors are Japan’s largest wireless operator NTT Docomo Inc., Saudi Arabia’s sovereign wealth fund PIF, Singapore’s state-owned investment company Temasek Holdings Pte. and AT&T Inc.

©2020 Bloomberg L.P.