Magic Leap Inc., the high-profile mixed-reality startup that has raised more than $2 billion in funding, is reportedly laying off about 1,000 employees to shore up its long-term business prospects.

The cuts were first reported today by Bloomberg, which cited sources as saying that the departing staffers represent about half of the startup’s workforce. Magic Leap Chief Executive Officer Rony Abovitz confirmed that layoffs are being made in a blog post but didn’t address the reported numbers.

“To better prepare Magic Leap for the future, we have taken a close look at our business and are making targeted changes to how we operate and manage costs,” Abovitz wrote. “This has made it necessary for us to make the incredibly difficult decision to lay off a number of employees across Magic Leap.”

The workforce reduction is being accompanied by a major shift in business strategy. Magic Leap, which originally targeted consumers with its Magic One mixed reality headset, is now refocusing on the enterprise. That’s a market where the startup will compete with the likes of Microsoft Corp. with its HoloLens headset.

Whereas the HoloLens is a self-contained system with onboard compute capacity, the Magic Leap One offloads processing to a small wearable computer that users can clip onto their clothing. Placing some components in a separate device has enabled Magic Leap to make its headset more compact than Microsoft’s rival product. However, winning over large corporate customers will require more than just better ergonomics.

Magic Leap recently stepped up its efforts on that front by introducing an add-on dubbed Enterprise Suite that includes two years of support, device management software, fast device replacements and other value-added services. The startup can be expected to enhance this part of its product portfolio in the wake of its strategic shift.

In his blog post, Abovitz revealed that “we are currently in the process of negotiating revenue generating strategic partnerships.” A large healthcare organization is reportedly among the firms with which Magic Leap has held talks. Previously, Magic Leap struck an alliance with Tokyo-based carrier NTT Docomo Inc. to bring its headset to Japan in a collaboration aimed among others at courting local enterprises.

Magic Leap’s exit from the consumer side of the mixed-reality market will mean less competition for Facebook Inc., whose Oculus Rift division leads the segment. But the startup could theoretically stage a return further down the road. Any new hardware, graphic improvements and other enhancements that Magic Leap develops for corporate customers could eventually be carried over at least in part to a consumer product.

Photo: Magic Leap