General Magic Out of Tricks

Less than two months after signing a deal to provide a key voice application
for General Motors’ OnStar information service, General Magic shut its doors for good, in order to liquidate its assets over
the next two to four months to pay its creditors.

In late July, General
Motors inked a deal with General Magic
to use the company’s J2EE-based
voice application enterprise platform in OnStar’s Virtual Advisor, which
promises to give drivers location-based information such as weather and
traffic.

“Current adverse economic and market conditions along with the continued
slowdown in IT spending were significant factors in preventing us from
raising money or facilitating a merger or acquisition,” Kathleen Layton,
General Magic’s president and CEO, said in a statement. “Without the
immediate availability of additional funding, our board has reluctantly
concluded that the company cannot continue to operate.”

After beginning in 1990 as a maker of operating systems for handheld
devices, General Magic decided to hitch its future on telematics, wireless
Internet services designed for cars.

Despite enthusiastic analyst estimates that it will be an industry worth $42
billion in 2003, telematics has been slow to catch on with consumers. Part
of the problem has been cost: OnStar’s premium plan runs a hefty $399 per
year. Meanwhile, GM rival Ford dissolved
its Wingcast telematics partnership
with Qualcomm in June.

General Magic said about 15 employees will transfer to OnStar to help
support the software for the Virtual Advisor.

In July, General Magic issued a revenue warning due to lower enterprise
spending in a tight economy. The company also tried a 1-for-14 reverse stock
split that month to revive its flagging stock price.

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