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VR/AR
Magic Leap is Running Out of Money
March 22, 2020
Led by its charismatic Chief Executive Officer Rony Abovitz, Magic Leap has raised about $2.6 billion from investors and claims a valuation of $6 billion to $8 billion, making it the most well-funded tech startups in the U.S. as it built a headset that could project digital objects onto the real world. However, the company is running low on operating capital and is working with an adviser to consider forming a partnership or selling a significant stake ahead of a potential listing, said people knowledgeable about the transaction asking not to be identified because the information is private. Magic Leap hopes to fetch more than $10 billion as it pursues a sale according to these people. Such a high valuation is questionable because suitors would have to take a long-term bet without substantial near-term revenue. AR hardware adoption by consumers is still years away, so whoever buys them, must have the financial capacity to carry the products through as AR evolves.
Magic Leap, which counts Alphabet Inc.’s Google and Alibaba Group Holding Ltd. among its largest investors, is gauging potential interest from large tech companies including Facebook Inc. and medical giant Johnson & Johnson. An initial meeting between Facebook and Magic Leap never progressed to deal talks, according to a person familiar with the matter.
Magic Leap’s deliberations, which may not lead to a transaction, come as the company shifts its focus to selling its products to companies in the health-care, industrial and financial sectors after slower-than-expected adoption by consumers.
Representatives for Magic Leap, Facebook and J&J declined to comment.
Omar Khan, Magic Leap’s chief product officer, said in an interview earlier that the company’s Magic Leap 2 product will be released next year and will help it build a consumer presence. He said he expects the company to develop a disproportionate share of the market, which he said will top $100 billion within a few years. Among the company’s other big name investors are Japan’s NTT Docomo Inc., Saudi Arabia’s sovereign wealth fund PIF, Singapore’s state-owned investment company Temasek Holdings Pte. and AT&T Inc. Magic Leap lured investors with the promise of creating spatial computing technologies that offer consumers high-end augmented reality experiences. But the initial headsets are kind of goofy looking, high priced and have had limited success in the commercial market and even less in the consumer market. Microsoft’s HoloLens seems much more successful.
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. These audacious promises have made Magic Leap the subject of both intense interest and a target for skeptics, who say it has failed to deliver on its early promise and hasn’t met its own sales goals. Attracting a deep-pocketed suitor could buy the company time to roll out future products while allowing investors to cash out. The company has also been trying to raise another $500 million since last year but the round hasn’t closed yet. There have also been signs of discord within Magic Leap. The company has faced legal disputes with multiple former employees and Chief Financial Officer Scott Henry stepped down from that role at the end of last year. The first rumbling of trouble came back in 2018, when the device was finally revealed to the public, after much Apple-style secrecy and well-hyped promotion, only to be scorched by many tech reviewers. The next major warning sign came just months ago when Magic Leap signed over its patents to JPMorgan Chase as collateral.
Magic Leap is Running Out of Money
March 22, 2020
Led by its charismatic Chief Executive Officer Rony Abovitz, Magic Leap has raised about $2.6 billion from investors and claims a valuation of $6 billion to $8 billion, making it the most well-funded tech startups in the U.S. as it built a headset that could project digital objects onto the real world. However, the company is running low on operating capital and is working with an adviser to consider forming a partnership or selling a significant stake ahead of a potential listing, said people knowledgeable about the transaction asking not to be identified because the information is private. Magic Leap hopes to fetch more than $10 billion as it pursues a sale according to these people. Such a high valuation is questionable because suitors would have to take a long-term bet without substantial near-term revenue. AR hardware adoption by consumers is still years away, so whoever buys them, must have the financial capacity to carry the products through as AR evolves.
Magic Leap, which counts Alphabet Inc.’s Google and Alibaba Group Holding Ltd. among its largest investors, is gauging potential interest from large tech companies including Facebook Inc. and medical giant Johnson & Johnson. An initial meeting between Facebook and Magic Leap never progressed to deal talks, according to a person familiar with the matter.
Magic Leap’s deliberations, which may not lead to a transaction, come as the company shifts its focus to selling its products to companies in the health-care, industrial and financial sectors after slower-than-expected adoption by consumers.
Representatives for Magic Leap, Facebook and J&J declined to comment.
Omar Khan, Magic Leap’s chief product officer, said in an interview earlier that the company’s Magic Leap 2 product will be released next year and will help it build a consumer presence. He said he expects the company to develop a disproportionate share of the market, which he said will top $100 billion within a few years. Among the company’s other big name investors are Japan’s NTT Docomo Inc., Saudi Arabia’s sovereign wealth fund PIF, Singapore’s state-owned investment company Temasek Holdings Pte. and AT&T Inc. Magic Leap lured investors with the promise of creating spatial computing technologies that offer consumers high-end augmented reality experiences. But the initial headsets are kind of goofy looking, high priced and have had limited success in the commercial market and even less in the consumer market. Microsoft’s HoloLens seems much more successful.
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. These audacious promises have made Magic Leap the subject of both intense interest and a target for skeptics, who say it has failed to deliver on its early promise and hasn’t met its own sales goals. Attracting a deep-pocketed suitor could buy the company time to roll out future products while allowing investors to cash out. The company has also been trying to raise another $500 million since last year but the round hasn’t closed yet. There have also been signs of discord within Magic Leap. The company has faced legal disputes with multiple former employees and Chief Financial Officer Scott Henry stepped down from that role at the end of last year. The first rumbling of trouble came back in 2018, when the device was finally revealed to the public, after much Apple-style secrecy and well-hyped promotion, only to be scorched by many tech reviewers. The next major warning sign came just months ago when Magic Leap signed over its patents to JPMorgan Chase as collateral.
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