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Magic Leap has gone through a whirlwind in the past year. Founded in 2010 by Rony Abovitz, the company set out to be a pioneer in augmented reality and mixed reality technologies. Abovitz raised $2.6 billion in multiple rounds and developed the Magic Leap One, a mixed reality headset that debuted in August 2018.

But sales were slow for the $2,295 device, as consumers didn’t dive into the expensive tech. Finally, in April 2020, Magic Leap decided to shut down its consumer division and laid off about 1,000 employees, or half its workforce. In May 2020, Abovitz announced he would replace himself as CEO (while staying on the board) just as the company got a major lifeline with a $350 million raise. In September 2020, the board appointed Peggy Johnson as CEO. She’s a a former Microsoft executive, and this was part of a plan to double down on the enterprise markets.

She spoke at the VivaTech event last week about how there are big opportunities for Magic Leap and mixed reality in health care, and she pointed to an operation at the University of California at Davis where surgeons used Magic Leap headsets to plan for the separation of two conjoined babies. The operation turned out to be a success, and it showed the value of visualization that mixed reality devices can deliver. Johnson also believes the company can prosper from 3D visualization in manufacturing and the public sector.

Johnson is getting ready to launch the Magic Leap Two device later this year. She said it will be about half the size of Magic Leap One. It will be about 20 % lighter, and it will have about three- to four-times the processing power. The rendering and images are super high fidelity, she said.

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And that will be a major accomplishment, as rivals such as Apple and Facebook have yet to launch their mixed reality technologies and Microsoft is on its second version of the HoloLens. I asked Johnson how she can compete against those other companies that have billions of dollars at their disposal for research in this long-haul competitive battle. I got an interesting answer.

Here’s an edited transcript of our interview.

Above: Peggy Johnson is the CEO of Magic Leap.

Image Credit: Magic Leap

VentureBeat: What was it like becoming CEO of Magic Leap?

Peggy Johnson: I had had the opportunity to see the technology before. I visited Magic Leap when I was still at Microsoft. I had the tour and understood where they were in the development of the technology. I knew it was solid. But there needed to be some focus. Somebody had to narrow the target markets. It was an interesting time, considering the pandemic. The only person I’d ever met in person was Rony Abovitz, the previous CEO. But it was very clarifying. I knew what needed to be done. When I got to the company that was my main focus, getting the company to just work on a few areas of enterprise. Not even across enterprise, but just a few areas of enterprise — health care, manufacturing, and the public sector.

VentureBeat: What was it about those particular areas that made the most sense? Had you already made progress there?

Johnson: We had made some progress there. I will say, though, all three of those areas were already used to heads-up displays in some format. Surgeons wear them during operations. Certainly public sector personnel and military are comfortable with HUDs. Often you see them in manufacturing environments. Those were going to be the easier lift, we felt, to show folks what AR could do for them. That has been the case. Those are the ones where we’ve seen the earliest traction, across those three sectors.

There are three use cases we focus on. I don’t know if you heard this earlier. That is training, remote assistance — when you don’t have the professional nearby they can see what you see. And then last, any sort of 3D visualization, from CAD systems to design teams, that sort of thing. Those are the three main areas of focus for us.

VentureBeat: The technology was still kind of expensive, but I suppose those applications have so much benefit that those are where customers are willing to pay for what you have now.

Johnson: Correct. You’re spot on, yes. There’s a return on investment for customers in those areas that makes sense. If you have a tangible ROI, there’s adoption, and then that drives volume, which will drive further adoption as we can make the product smaller, lighter, faster, cheaper. In fact, our Magic Leap 2 device, which is queued up to launch into our early access program in Q4 of this year, has those elements to it. It’s about half the size of Magic Leap One. It’s about 20 percent lighter in weight. It has about three to four times the processing power. The rendering and images are super high fidelity.

Then we also have doubled the field of view, which is a very important metric. It’s the palette that you can paint your digital content on. That has been an area–it’s been kind of a pain point in AR up until now. We have doubled it, which has been a big improvement. All of these areas are things that will lend themselves to all day, everyday use, which is what enterprise has been asking for, a device that you can put on your head in the morning and wear all day long.

Above: Magic Leap is working on its second headset.

Image Credit: Magic Leap

VentureBeat: Can you spell out a bit more about one of those applications, what people actually do with it?

Johnson: Sure. We have been working through the pandemic, which has been quite a catalyst for AR in general, because companies are looking for these remote working solutions. We’ve worked with a number of companies on training. They can get their training teams together. A lot of times corporates will fly in new trainees and house them in their training facilities. They have to accommodate them for a week or several weeks. We had companies reach out to us, including Farmer’s Insurance, that wanted to continue to train their claims adjusters during the pandemic. They have an ISV partner called Talespin, and they came up with a training program that allowed Farmer’s Insurance to continue to train from wherever their new claims adjusters lived.

That’s one use case in training that frankly can save companies money. They’re not flying everyone to a physical location. It also saves time. I believe that even post-COVID, those sorts of scenarios will continue. It’s not just business continuity during the pandemic, but post-pandemic there’s a lot of savings in time and resources.

VentureBeat: That was the “Firing Barry” one, too, right? The Talespin folks? Do you remember that application that they showed off?

Johnson: No, I don’t know that one. But it must have been before my time. I’m still learning about the past. Some of the other use cases that we’re working with — Ericsson has an interesting manufacturing application where they are replicating the Japanese gemba walks, where a manager will walk through a factory looking for areas of improvement. Now the gemba walks can be done with augmentation. You can look at a piece of machinery in a factory and all the statistics can be digitally visible as you walk past it. They’re physically cemented in a certain position in the factory. Then you go to the next machine and those characters, the efficiency of the machines, can be highlighted. You can maintain the machines. You can run videos that show you how to maintain them. You can call in an expert if you have a problem in the factory that you haven’t addressed before. They have some interesting improvements to the workflow process using Magic Leap.

Another interesting one, and we can send you the video, is with our partner Brainlab, an ISV. They do 3D scans of MRIs and CAT scans. They have integrated it into Magic Leap One, and they’ll integrate it into Magic Leap Two when it comes out later this year. They’ve created the ability to train doctors using 3D scans. An interesting video we have from them, they were working with UC Davis in California to begin the separation of some conjoined twins who were actually conjoined at the brain. They can put the 3D image of the brain in the middle of the room, and the 30-person surgical team all trained on it. The surgery took place last fall and was successful. They were able to show the parents what was going to happen to their children. It was a great outcome and something that just about every hospital around the world does every day, mapping out the surgical pathways that the surgeon will take during an operation. In this case, 30 people got to look at the image together, ask questions, and see exactly what was going to happen ahead of the operation. They trained for months on the device.

Above: Magic Leap sees automotive applications for mixed reality.

Image Credit: Magic Leap

VentureBeat: Pulling out to look at the whole industry, what’s it like to operate in this environment where the tech giants are so interested? They’re spending billions of dollars on these mixed reality investments. Facebook, Microsoft, Apple, and others. What is that competitive environment like?

Johnson: Well, one edge we have is we’ve been doing this for 10 years now. We’ve been innovating, developing in this space. AR is very hard. It’s a challenging optics problem to solve for, to very precisely place that digital content in the physical realm. It’s something that, in comparison to VR, is far more challenging. That’s where Magic Leap excels.

I will say, having all the other big tech companies in the field now is a great validation of the technology. It’s been good for us. You hear more about it in the press. People are more familiar with it. During the pandemic, they turned to us to look for remote working solutions because we had them. It’s been a positive to have more folks in the industry putting resources into this space because it does validate the market for AR.

VentureBeat: How do you transition to this next generation? What’s the plan for it?

Johnson: The first generation was built to be a consumer device. In some ways it didn’t quite hit that market, but largely because it’s a larger device. There wasn’t a lot of content for it. So how do we do things differently with Magic Leap Two. We’ve made a smaller device, an all-day wearable. It improved on the metrics that our enterprise customers were asking us for — smaller, lighter, faster, cheaper. But the more important thing is that the ecosystem around it, the community of apps, very different than consumer clearly–a lot of those applications and the devs already have a knowledge of AR. They understand what integrating into an AR platform can do to supercharge their apps. We’ve been working with a number of ISVs and we’ll continue to build that community leading up to the launch of Magic Leap Two.

Largely they’re the ISV partners of our customers. For instance, UC Davis used Brainlab. We worked with Brainlab to integrate their application onto our device. Farmer’s Insurance used Talespin. There’s a small ISV up in Seattle called Taqtile. They do a lot in manufacturing and industrial environments. For instance, improving the workflow process of a frontline employee who does a certain set of tasks every day inside a factory. They can have this amplification of their abilities with the use of our AR device.

Rony Abovitz is the founder of Sun and Thunder.

Above: Rony Abovitz is the founder of Sun and Thunder and former CEO of Magic Leap.

Image Credit: Sun and Thunder

VentureBeat: Is the challenge right now to keep the tech moving forward, but take the costs out?

Johnson: Correct, yeah, and to make it smaller, lighter, faster, to continue down that path. I always think the analogy is very much like the mobile phone industry. In the beginning, the phones were big and expensive. They were largely only sold to enterprise, customers who could rationalize the investment. Salespeople who worked from the road and had to check in with the office throughout the day used to have to stop, find a parking spot, find a phone booth. Now they could just call from their cars. It didn’t matter that the phones were bigger and more expensive because there was a tangible ROI.

That’s the area on the curve that we’re at with AR right now. The space that’s the most viable is enterprise AR. That’s why we have our focus there. We can deliver that very tangible ROI, whether it’s savings in training costs or efficiencies that can be introduced in the operational theater. Those are the areas we’re focused on.

VentureBeat: For the technology, do you think you can take it outdoors? Or will you manage to have good applications that stay indoors?

Johnson: We have some techniques we’re working on for Magic Leap Two to provide for a better outdoor experience. It’s true that there are a lot of scenarios that need that, particularly in the military space, where they’re trying to simulate training outdoors. The device itself needs to be able to handle those situations. We’ll have more to share on that when we get closer to our early access program. But it’s definitely a problem we’ve heard about from enterprise users that we aim to solve with Magic Leap Two.

VentureBeat: What are the goals on the financial side? Do you feel like it’s still possible to raise more money, or at this point do you try to zero in on profitability from where you are?

Johnson: Right now we’re stable. We’ve stabilized the company from a year ago when they were going through a period of transition. We’re comfortable with our current spot. We’re on the eve of launching Magic Leap 2 to early adopters in Q4 of this year. For the time being we’re comfortable that we can raise the funds we need to manufacture the product and sell the product.

Magic Leap 1 headset is $2,995.

Above: Magic Leap One headset began selling for $2,295 in 2018.

Image Credit: Magic Leap

VentureBeat: You had some management changes recently.

Johnson: We did. You should look at those as just the natural progression of any company going through a transition. We’ve also brought in several executives. If you look a little bit earlier in the announcement chain, you’ll see we’ve brought in executives from a variety of companies who’ve helped us in our new focus on the enterprise area. We’ve brought in a CFO, a chief business officer, a chief product officer, and a chief software and cloud officer. All of them have been extremely additive to our senior leadership team, and all are as excited and passionate about the AR space as I am. It’s been a wonderful group. That’s on top of a great, world-class talent base that we had at the company when I arrived.

VentureBeat: Did you get any interesting reaction to the talk today?

Johnson: It was wonderful to be able to present Magic Leap’s new direction to a fairly large audience. We don’t know the numbers yet. I’m sure we’ll speak about them soon at VivaTech. It’s a hybrid conference. We’ll have 5,000 people here, but obviously many more online. They were excited to hear about current use cases that are delivering ROI right now. I think that resonated with the audience. Sometimes AR is put in the bucket of, “Oh, it’s years away.” That’s just not true. For enterprise AR it’s right now.

VentureBeat: If you look back at Rony’s legacy, how do you see that? What would you like your legacy to be?

Johnson: Rony’s legacy, he was an amazing visionary. 10 years ago, when the company started, he saw the promise of AR, and then he went to work developing the technology. He’ll always have that legacy in this space. He was the first. What I’d like my legacy to be is the focus that I’ve brought to the company on the early adopter markets. We have to focus on the areas that are going to find that real, tangible ROI in the near term. Just like mobile phones, we can get to some volume, which will then drive further integration of the silicon, smaller componentry, smaller devices.

VentureBeat: Any last comments you’d like to add to the conversation?

Johnson: No, just that we’re pretty excited about Magic Leap Two coming out. I’m so proud of the team that built this product during a global pandemic and kept it on track. We will be talking about partners for that early access program in the coming months. Stay tuned on that front.

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