Magic Leap Is Considering a Sale, Stakeholder or Partnership

Magic Leap is exploring the possibility of a sale, according to sources. The Florida-based startup raised $2.6 billion to create augmented reality products, and now has hired an adviser to consider “strategic options” for moving forward. In addition to the potential of a sale, Magic Leap could sell a stake in the company or form a strategic partnership. The company is valued at $6 billion to $8 billion. Among the company’s largest investors are Alphabet’s Google and China’s Alibaba Group Holding.

Bloomberg reports that other Magic Leap investors include Japan’s NTT Docomo, Saudi Arabia’s sovereign wealth fund PIF, Singapore’s state-owned investment company Temasek Holdings and AT&T. Magic Leap had an initial meeting with Facebook to discuss a potential purchase, but it “never progressed to deal talks,” said sources. The company is also gauging the interest of “medical giant Johnson & Johnson.”

Microsoft and Amazon have been “investing in augmented reality with their own divisions,” said Bloomberg Intelligence senior analyst Jitendra Waral. Noting that, “AR hardware may be limited to enterprise uses for the next several years,” Waral added that, “the valuation of the company will be a question mark because suitors may have to take a long-term bet without substantial near-term revenue … [and] the scalability of the company’s technology could also be an issue.”

“One thing to keep in mind with AR hardware is we do anticipate mainstream adoption being a few years away, so whoever buys them needs to have the financial capacity to carry the products through as AR is still evolving,” he said.

Magic Leap, led by chief executive Rony Abovitz, has more recently shifted “its focus to selling its products to companies in the healthcare, industrial and financial sectors,” and chief product officer Omar Khan reported that Magic Leap 2, slated for release in 2021, “will help it build a consumer presence.”

Magic Leap was founded in 2011 and debuted its $2,300 headset in 2018. By vowing to “deliver technology rivaling television or the telephone in societal impact,” the company quickly became “the subject of both intense interest and a target for skeptics.”

Bloomberg notes that, although numerous tech companies are in development with AR products, “the entire hardware sector is facing new threats, from tariffs in the U.S.-China trade war to supply chain shortages, after factories closed with the coronavirus outbreak … [all of which is] resetting expectations at major companies such as Apple, and may hit even more acutely at private startups that rely on outside investors to keep their operations going.”