Microsoft Lays Off 60 On Its HoloLens Team In Israel As It Shifts Development To The U.S.

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Microsoft has yet to ship its first HoloLens holographic imaging device, but it is moving swiftly on to the next generation of development nonetheless. TechCrunch has confirmed that Microsoft has dismissed 60 people in Israel who work on the HoloLens — 30 full-time staff and 30 contractors. The plan is to wind down work on its VR headset and platform in the country and shift development to a different technology in the U.S.

The news was initially reported in Israeli publication Ynet (in Hebrew), and we have confirmed the details also directly with Microsoft:

“We continually evaluate our business needs and recently made decisions affecting some positions in one of our groups in Israel,” a spokesperson notes in a statement provided to TechCrunch in response to questions about the layoffs. “As needed, we increase investments in some areas and de-invest in others which results in the movement of jobs across the organization, and at times, job eliminations. Our priority is to work with and support employees affected by this decision.”

HoloLens development in Israel up to now has been based around a team of engineers and others who joined Microsoft after it acquired an Israeli startup called 3DV Systems in 2009. At the time, the move was seen as a way of enhancing the company’s as-yet unreleased Kinect motion-sensing devices for gaming and computing.

However, Microsoft disputed that interpretation, and indeed the eventual development of the HoloLens underscored that it had more in store for the talent and tech that it picked up reportedly for $35 million.

But things have moved on it seems. It’s not clear why Microsoft is shifting to a different technology, nor which technology that may be.

If Microsoft is using any third party technology — similar to how it worked with PrimeSense on Kinect before it was acquired by Apple — one guess might be Magic Leap, a startup in Florida that has attracted a lot of attention after raising nearly $600 million to develop its own (still being developed) technologies.

MagicLeap is backed by Microsoft rival Google and its founder has actually publicly dissed the HoloLens in the past — two points that could count against it working with Microsoft. However, a recent report about yet more Magic Leap fundraising, to the tune of $1 billion, noted that the startup has dropped hints about working on “a souped-up version” of Google Glass or the HoloLens, so something may yet brew up between the companies.

(Also Microsoft and Google have co-invested before, in Uber and Cloudflare as two examples.)

Magic Leap would not comment on whether it was working on the HoloLens or anything else, or provide any information about the reported new investment. “Magic Leap is working on Magic Leap,” a source close to the company said.

On the other hand, Microsoft has also been hard at work on developing HoloLens in the U.S., and perhaps to offset any news trickling out of Israel, the company yesterday just happened to post some of the recent progress from the group in Redmond.

With Microsoft failing so far to build a successful smartphone business, the company continues to look for the big thing that could define the next generation of computing. And in that context, whether development is in-house or with a third-party, it feels like Microsoft has a lot riding on HoloLens being a big hit, and working beautifully.

Microsoft first announced the HoloLens in January this year to lots of fanfare, and since then there have been careful updates charting its progress.

They have included taking a small group of journalists (including our own Frederic Lardinois) on a demo that included building an app for the device; a timeline and price ($3,000) for the first developer kits; sending a HoloLens into space for NASA’s use; and working with Volvo on car-buying applications and with Autodesk on industrial design applications. There is also talk that Microsoft will work with Asus on a low-cost version of augmented reality glasses.

We have reached out to Microsoft for more detail and we’ll update as we learn more.