Microsoft exec Peggy Johnson joins disturbed AR start-up Magic Leap as CEO

Peggy Johnson

Peggy Johnson currently serves as the chief executive officer of Magic Leap, succeeding Rony Abovitz in July 2020. Before joining Magic Leap, she held the position of Executive Vice President of Business Development at Microsoft. She has a BS degree in Electrical Engineering from San Diego State University.

Microsoft executive Peggy Johnson will join Magic Leap as CEO, the company announced Tuesday.

Magic Leap has had it rough during the pandemic. In March, word got out that the struggling augmented reality company was looking for a buyer. A month later, it reportedly laid off roughly half its workforce. Another month passed and it somehow pulled an additional $350 million in funding out of nowhere. About a week after that, CEO Rony Abovitz stepped down. Now, the beleaguered startup has announced it’s found a new head honcho: Peggy Johnson.

Johnson, who currently serves as executive vice president of business development at Microsoft, will take up the mantle on August 1. Before that, she was an executive at chipmaker Qualcomm, and before that an engineer for General Electric’s military electronics division.

In an interview with the New York Times, Johnson described the move as something she chose to do, reaching out to Abovitz once news broke he was leaving. Johnson also noted that the pandemic highlighted expanded opportunities for AR as more people work remotely. Namely, for enterprise-first applications like job training, medicine, and industrial automation. “It really says something that, at this point in time, I would leave Microsoft to go to this space, because Microsoft is doing quite well,” Johnson told the NYT.

Johnson joins the augmented reality start-up after leading Microsoft’s M&A strategy and venture fund as executive vice president of business development.

It is a bold move, considering that AR headsets have not done particularly well since the onset of the global pandemic. Or, ever. In the past month, Bose shut down its AR division, effectively killing its audio-only Bose Frames AR sunglasses. That was followed by news that North, a Canadian startup that’s spearheaded consumer AR glasses over the past two years, was snapped up by Google for an estimated $180 million. As part of the deal, North’s forthcoming second-generation smart glasses were also killed off.

Magic Leap itself also flopped in the consumer space. After years of hype and $2 billion in investment, the consensus was that its first headset was underwhelming. For many reasons, AR headsets haven’t quite taken off despite major advances in the technology itself. The companies that tend to stay afloat are the ones who have shifted gears toward the enterprise space—Microsoft’s HoloLens 2, Google’s Glass Enterprise 2, Epson’s Moverio, to name a few.

Magic Leap itself has also refocused its efforts toward enterprise, which does lend Johnson’s move the air of a calculated risk, rather than a straight-up Extremely Bad Idea. Still, AR and spatial computing is a nascent industry and it’s unclear if it’ll ever be tech consumers are willing to adopt.

Johnson joins the augmented reality start-up after leading Microsoft’s M&A strategy and launching its venture fund as executive vice president of business development. She was hired by Microsoft CEO Satya Nadella in 2014 after a 24-year career at Qualcomm, where she worked in several roles, including running the internet services unit. At Microsoft, Johnson was a member of the company’s senior leadership team and navigated Microsoft through major partnership deals and acquisitions, including its $26.2 billion purchase of LinkedIn in 2016.

Magic Leap founder Rony Abovitz announced in May he would step down as CEO.

Magic Leap’s announcement comes weeks after founder Rony Abovitz announced in May he would step down as CEO, saying “it became clear to us that a change in my role was a natural next step.”

Founded in 2011, Magic Leap was the subject of extensive hype in its early days, and managed to raise about $3 billion from Alphabet’s Google and other investors. But the company’s first product, released in 2018 for over $2,000, showed lowered ambitions since the company’s early demonstrations and did not sell well. Magic Leap recently pivoted to focus on business scenarios. During the coronavirus pandemic, Magic Leap announced in April it would lay off staff as part of a structural overhaul. The New York Times reported that about 600 of its 1,900 workers were impacted.

Johnson told the Times she was driven to take the job because she wanted to be a chief executive. Her last day at Microsoft will be Tuesday, the company said in a filing.

Microsoft will look at internal and external candidates to replace Johnson, a Microsoft spokesperson told CNBC, and in the meantime, finance chief Amy Hood will take on her direct reports.

In an email to Microsoft executives Tuesday morning, Nadella wrote, “I want to thank Peggy for her leadership and partnership these past six years. Her ability to connect people, drive consensus, and forge relationships has taught me a lot. Through the years, she has been a clear role model for women at Microsoft and in technology, and I know she’ll continue to inspire young women in STEM in her new role.”

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