Magic Leap – Second life pt. II

Magic Leap makes its pitch to stay in the game.

• Magic Leap has allowed reviewers to get an early look at its new device which is smaller, more powerful but still very far from anything that a consumer would pay for.
• This is why Magic Leap followed everyone else in focusing on the enterprise because productivity is far more important to these customers than the user experience.
• This means that if a technology or device provides a big increase in productivity, then one can get away with a second-rate user experience.
• The technology challenges of augmented reality (AR) are so great that the user experience is going to be second or third rate for years to come, meaning that over the next 5 years, this segment will be entirely dependent on selling devices to companies.
• Magic Leap made this pivot when Peggy Johnson joined as CEO and the company raised $500m to re-spin the company and its proposition.
• The Magic Leap 2 is the first test of the “new company” and its pivot towards the enterprise is clear in this device.
• The most obvious change is in how the company has decided to construct the field of view.
• It is larger (but still way too small) than the previous one but critically it is in a portrait orientation as opposed to landscape which is what everyone else has chosen to do.
• One reviewer described this as having a paperback book hovering in one’s field of vision as opposed to a pack of playing cards (Magic Leap 1).
• The idea here is that for enterprise applications, the portrait format is more useful than landscape.
• I can attest to this as RFM’s workstation uses monitors that are all in the portrait format which makes email, document reading, web browsing and so on much easier.
• It is not so great for editing spreadsheets but this is hardly a relevant use case for AR at this stage.
• The device still has a tethered puck where all of the processing is carried out and it appears that this time Magic Leap has chosen to go with AMD as opposed to Qualcomm which is in the Hololens.
• The device also has the ability to blackout the glasses effectively turning the device into a virtual reality device but I suspect that this functionality is aimed at making the virtual display more visible when it is being used outdoors or in brightly lit environments.
• The result is a device that effectively matches its main competitor, Hololens, but does not blow out expectations.
• This is the elephant that Magic Leap still has to shake off its back.
• Expectations for the original Magic Leap were so far away from the reality of what it delivered that the stigma of failure is still sitting on the company.
• However, if the device sees some uptake in the verticals that Magic Leap has identified (healthcare and defence) and attracts developers to its proprietary platform, then it may begin to improve its image.
• The problem that Magic Leap has is that it is competing for the Metaverse against companies who are pouring in $10bn+ each a year and there is no way that Magic Leap can keep up with that.
• Hence, I suspect that if it can get some traction and establish a position with enterprise customers, then it will be acquired by someone with deeper pockets who can take it to its ultimate destination.
• Hence, the outlook for new investors will be to make a healthy return but this is unlikely to be the 20x or 50x that many investors in start-ups dream of.
• Magic Leap has a credible pitch for the enterprise but only its uptake when commercially available will tell us whether the customers agree.