Why Magic Leap’s Rony Abovitz Had To Step Down

Magic Leap CEO Rony Abovitz speaks at AT&T Shape

Magic Leap has long been the talk of the tech industry for years with all the hype that the company built around its vision for the future. Rony Abovitz has been the leader of the company from the beginning as the founder and CEO. However, Magic Leap made a lot of big promises about what consumers could expect from a future Magic Leap device and many were disappointed by the first headset that the company brought to market. The company raised $2.6 billion dollars prior to this week’s $350 million funding announcement, which is likely to give the company a real fighting chance at making the new enterprise vision a reality. But Magic Leap is now a hobbled company after laying off many workers and is going to need to undergo a culture change to address the many mistakes that have been made. Recently, Magic Leap laid off roughly 50% of the company’s workforce to help the company weather the company’s struggle to bring in revenue and profitable business. So, Magic Leap is already in quite a hobbled state, especially when you consider that any teams that were not essential to the new pivot towards enterprise were laid off, which I believe was a mistake.

Unrealistic expectations

So, how did we get here? Well, for that we have to start at the beginning. Magic Leap started as a mysterious startup out of Florida with a highly secretive mission and technology. This secretive nature and decision to selectively communicate with the public was a detrimental strategy for Magic Leap because when you don’t communicate clearly, people’s minds run wild with unrealistic expectations and if you don’t check those expectations they run rampant. Only Apple can be Apple, everyone needs to stop trying to copy them. One of Magic Leap’s biggest mistakes was that they set expectations so unrealistically high with a series of marketing videos that showed things that many thought to be impossible in the near future. One of the most notable videos was the breaching whale video which the original is apparently no longer online but has been saved by many others. One of the big problems with this video was that it set unrealistic expectations about what was possible with Magic Leap’s technology, especially considering image quality and field of view. This kept happening with other subsequent videos as well, where it was obvious that the view captured in the video was much wider than what the headset would eventually be able to deliver. So, naturally, by the time Magic Leap did launch the Magic Leap One developer headset people were disappointed by what Magic Leap brought to market.

Hardware decisions

One of the big problems that I believe Magic Leap had was that they had the desire to maintain absolute secrecy, which meant doing as much as possible internally. However, doing things entirely internally is expensive and unnecessary, especially when there are companies that have that expertise. Many rumors have gone around that Magic Leap even wanted to attempt manufacturing its own devices in-house but that was quickly quashed. Magic Leap’s decision to go with an NVIDIA chipset was also quite telling because at that time and even today the Tegra X2 was considered to be an embedded chip which is a much hotter and more power hungry chipset than the Qualcomm Snapdragon 845. In 2018 when it was made available, Magic Leap could have gone with the Snapdragon 845 which is actually a faster chipset than what is available in the Oculus Quest today and is VERY close to the Hololens 2 in performance albeit slightly slower. Instead, Magic Leap saddled the headset with a hotter more power-hungry chipset at the time, which meant that the compute puck inside of the Magic Leap One needed additional cooling and ran hot, which it still does today. NVIDIA uses TSMC’s 16nm process node for the Tegra X2 while Qualcomm uses Samsung’s 10nm process node for the Snapdragon 845, which means a significantly smaller and cooler chip. This translated to using a chip that operates anywhere from 7.5 to 15W (Tegra X2) instead of a chip that operates at under 5W. This decision always perplexed me because the Magic Leap One and AR devices are inherently mobile devices and should be thought of as mobile devices, which means power, sustained performance and battery life are crucial. Plus, literally everyone else in the industry was using Qualcomm Snapdragon chipsets for their AR and VR headsets and Magic Leap was the one that wasn’t and it simply didn’t make sense.

Missed opportunities

In addition to the unrealistic expectations, culture of secrecy and hardware decisions, Magic Leap also missed the opportunities that they had in front of them. Consumer AR has always been a difficult field and everyone was aware that this was going to be a long term and costly venture because of that. However, Magic Leap did not acknowledge the existence of enterprise AR until the company’s leadership realized that consumer AR would not be viable for quite some time and that they would need to pivot, something that the rest of the industry had already known for years. After all, Microsoft’s entire Hololens business division started as an enterprise-first venture with the first headset and leaned in even harder with the Hololens 2. That said, Magic Leap didn’t need to abandon consumer to completely pivot towards enterprise, I believe there are things that can be learned from consumer applications that can be utilized in enterprise and vice versa. Enterprise and consumer can exist in harmony, especially if you aren’t making much if any money on the consumer side.

In my opinion, Magic Leap’s real mistake was not listening to the market and reading what the market was asking for. For at least the last two years, it has been quite clear that enterprise AR is driving the industry forward and the ROI on those enterprise use cases is what has driven the industry forward. Google realized this mistake with the first version of Google Glass and quickly pivoted to enterprise with the Google Glass 2. Google made mistakes as well, but they pivoted towards enterprise far before Magic Leap ever did and that shouldn’t be the case because Google isn’t an AR company and its existence does not hinge on the success of AR in consumer. Even Google’s pivot to enterprise in 2019 was admittedly late, but it was still earlier than Magic Leap who seemed to have not gotten the memo until 2020.

Wrap up

Ultimately, when this many mistakes are made and such big changes are made to a company (like laying off 50% of the workforce), the buck stops with one person. That person is the CEO and that’s why Rony Abovitz simply had to step down as CEO. With his optimistic vision for consumer AR, Rony Abovitz simply isn’t the right person to move the company into the enterprise segment if the company is going to cater to enterprise customers looking for an entirely different vision. While it is unclear who would be the right CEO for the company, it is quite clear that the company’s culture has changed and a new CEO with the right vision could help Magic Leap be successful in enterprise and grow into a real competitor in the space or get acquired. It’s unclear what Magic Leap’s future will be, but I believe it was a mistake to lay off entire divisions of the company considering how much ground-breaking work they were doing. Magic Leap has a lot of good idea and good IP and it’s really a shame to see that anything that isn’t directly translatable to enterprise has been cut because I believe it will hurt them in the future when they try to ramp the enterprise business. Long term, the future for Magic Leap isn’t clear, but many of us in the industry have been cheering for Magic Leap to be successful, even if we were skeptical of Rony’s vision and the expectations he had set.

Note: Moor Insights & Strategy writers and editors may have contributed to this article.

Patrick Moorhead

Patrick founded the firm based on his real-world world technology experiences with the understanding of what he wasn’t getting from analysts and consultants. Ten years later, Patrick is ranked #1 among technology industry analysts in terms of “power” (ARInsights)  in “press citations” (Apollo Research). Moorhead is a contributor at Forbes and frequently appears on CNBC. He is a broad-based analyst covering a wide variety of topics including the cloud, enterprise SaaS, collaboration, client computing, and semiconductors. He has 30 years of experience including 15 years of executive experience at high tech companies (NCR, AT&T, Compaq, now HP, and AMD) leading strategy, product management, product marketing, and corporate marketing, including three industry board appointments.