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Augmented Reality Startup Magic Leap Cuts Half of Staff Across Company (Report)

Magic Leap now developing virtual reality tech for commercial use after its headset failed to hit sales targets

Virtual and augmented reality headset developer Magic Leap said it has made company-wide layoffs, which Bloomberg reported claimed roughly half of its workforce of about 2,000 people.

"The recent changes to the economic environment have decreased availability of capital and the appetite for longer term investments," Magic Leap founder and chief executive Rony Abovitz wrote in a blog post Wednesday.

Abovitz said "a number of employees" were to be cut, and that they were "at every level of our company, from my direct reports to our factory employees" in an attempt to freeze losses brought on by the coronavirus pandemic.

Though Magic Leap did not specify how many employees were laid off, Bloomberg reported that 1,000 people were cut and that they amounted to roughly 50% of the Magic Leap workforce, citing people familiar with the matter who wished not to be identified.

Magic Leap released its debut product, the Magic Leap One headset, in 2018 to lukewarm reviews. Its $2,300 price tag and cumbersome design kept many consumers from purchasing it for casual home use, and it was quickly outpaced in sales by Facebook's Oculus products and HTC's Vive headsets.

Abovitz said that the company is restructuring its business model to prioritize sales to businesses and developing enterprise-scale augmented reality and VR tech.

"While our leadership team, board, and investors still believe in the long-term potential of our (intellectual property), the near-term revenue opportunities are currently concentrated on the enterprise side," Abovitz said.

The pivot towards a focus on enterprise was partially motivated by a lack of market demand for consumer AR and VR products.

"This transformation means that we must decrease investments in areas where the market has been slower to develop, providing us with a longer runway while retaining the ability to explore and build on future use cases when the market signals readiness," Abovitz said.

The company is still working on developing a second-generation headset, the Magic Leap Two, but it's unclear when that will launch and if it will be available to consumers. "Adapting our company to these new market realities and our increased focus on enterprise means we must align our efforts to focus on the areas of our business that advance our technology, ensure delivery of Magic Leap 2, and expand product-market fit and revenue generation," Abovitz said.

Magic Leap was exploring the possibility of a sale prior to the pandemic outbreak and reportedly met with both Facebook and medical titan Johnson & Johnson, but no deals were confirmed according to a March report by Bloomberg. Amazon, Google, and Microsoft are all developing their own augmented reality devices and headsets, but it's not out of the question that one of them would see value in Magic Leap's intellectual property or spatial computing technology.

Magic Leap does not disclose its finances but Bloomberg reported that acquisition talks valued the firm at "more than $10 billion."

Magic Leap did not immediately return TheWrap's request for comment.