General Magic

What did it do?

General Magic was spun out of an internal Apple project in 1990 to build the Magic Cap operating system for handheld devices and the Telescript programming language. It formed partnerships with giants such as Sony, Motorola and AT&T, and Magic Cap ran on the Sony Magic Link and Motorola Envoy, both launched in 1994. In later years the company turned to a voice assistant service called Portico.

Why did it shut down?

The Magic Cap devices that launched in 1994 reached the market without any real infrastructure to support them: AT&T's PersonaLink network did not connect to the emerging internet and was shut down in 1996. Unlike rival devices, they offered no handwriting recognition, which put them at a disadvantage in marketing; they never sold in large volumes, and the partners had stopped making them by 1997. The company pivoted to Portico, a voice assistant service, but according to Forbes, losses, layoffs and missed forecasts sent the share price tumbling. Most of the executives who had brought Portico to life left in early 2000, and an attempt to reinvent the business as enterprise software failed to save it. On 18 September 2002 General Magic announced it would cease operations.

The story

In 1989 Marc Porat, then at Apple, persuaded chief executive John Sculley that the next generation of computer could only emerge from a partnership between computing, communications and consumer electronics companies. When the project, called Paradigm, struggled for resources inside Apple, the team proposed going it alone, and in May 1990 Porat, Andy Hertzfeld and Bill Atkinson founded General Magic. Apple took a minority stake and Sculley joined the board.

The company quickly became the most talked-about start-up in the Valley. By 1992 Sony, Motorola, Matsushita, Philips and AT&T were both partners and investors; by 1994 the alliance had grown to 16 companies. In February 1993 The New York Times described General Magic as Silicon Valley's most closely watched start-up. The company built Magic Cap, an operating system for handheld devices, and Telescript, a language that ran across networks. Its IPO in February 1995 raised $96 million and the share price doubled; total investment reached $200 million.

When the products met the world, however, the ground was not ready. The Sony Magic Link and Motorola Envoy, launched in the summer of 1994, relied on AT&T's closed PersonaLink network, which did not connect to the internet and was shut down in 1996. The lack of handwriting recognition hurt the marketing, the devices never sold in large numbers, and the partners stopped production in 1997. The company changed course towards Portico, a voice assistant service, which at its peak reached around 2.5 million users.

Even so, the company never recovered. Forbes attributed the steep fall in its share price to losses, layoffs and missed forecasts. Most of the executives who had launched Portico moved on to internet start-ups in early 2000. A new team led by Kathleen Layton tried to turn the voice technology into enterprise software, but on 18 September 2002 the company announced it would cease operations. The liquidation was completed in 2004, and Paul Allen bought most of the patents.

General Magic's legacy is bigger than its demise. It brought many ideas to life early, from software modems to small touchscreens and rich-content email. In 2018 a documentary told the company's story through interviews with figures such as Marc Porat, Andy Hertzfeld and Tony Fadell. The lesson is plain: when the right vision arrives at the wrong time, a company can run out of breath before the infrastructure needed to carry it has matured.

Lessons for founders

• If your product depends on someone else's infrastructure (a network, a payment system, a device), test whether that infrastructure is genuinely ready for users before you launch.
• If you deliberately leave out a core feature your competitors offer, have a clear message explaining to customers why it does not matter.
• Even when the vision is right, a product that arrives early needs a cash runway long enough to wait for the market to mature.
• Build ownership and incentive structures from the outset so you keep the team that delivers success after a pivot.

Sources

1. General Magic (Wikipedia)
2. General Magic: The Most Important Dead Company in Silicon Valley? (Forbes, 2011-09-18)

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