Over the weekend, software pioneer and virtual-reality (VR) visionary John Carmack announced that he would be leaving his position as consulting chief technology officer at Meta Platforms (META 2.05%). Citing efficiency issues within the company's VR unit and a lack of progress on the hardware front, the famous technology innovator closed the door on a decade largely spent on pushing VR forward.
Meta Platforms has positioned virtual reality and the metaverse as central to its growth strategy, and it's now lost someone who was arguably its most visible talent in these fields. Given that the company has bet so much of its future on success in these areas, what does Carmack's exit mean for Meta stock?
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Why Carmack's exit is significant
John Carmack is renowned as a programming savant and technology wizard, and he played a key role in shaping Meta's recent direction. Carmack previously served as chief technology officer at Oculus VR before Meta (then operating under the Facebook name) acquired the company in 2013, and he then shifted to a consulting CTO position at the tech giant in 2019.
In terms of the broader VR space, Carmack has been an undeniable titan. He also helped drive major leaps forward in the video game industry and played key roles in the creation of development engines and hugely popular and influential titles, including Doom. It's probably no stretch to say that Carmack's involvement with Oculus played a key role in Meta's willingness to spend $3 billion purchasing the company.
Why VR is so important for Meta
While Meta's social media platforms, including Facebook and Instagram, have been enormously successful, they rely on Apple and Alphabet's respective mobile platforms and (to a much lesser extent) browser software owned by other providers. In that sense, Meta isn't fully in control of its own destiny.
The lack of platform ownership also means that the company misses out on the applications-store setup that sees Apple and Alphabet generating revenue from applications that are built and scaled on their platforms.
The push into VR and the metaverse is an effort to change that, and while Meta has made some significant progress, John Carmack's recent exit is another painful reminder of the struggles the tech giant has had attempting to blaze a new trail.
Notably, Carmack isn't the only high-profile departure at the company within the last year. Former chief operating officer Sheryl Sandberg announced she was leaving her position in June, with the decision reportedly driven at least in part by the tech giant's new direction and heavy commitment to growth in the metaverse. Many investors aren't happy with the focus either.
What does the shake-up mean for investors?
Already facing headwinds due to macroeconomic pressures tamping down digital ad spending and industry-shifting privacy changes implemented by Apple on its iOS platform, Meta Platforms' big spending on VR and the metaverse has worried some investors. These initiatives aren't generating much in the way of revenue compared to their substantial development costs, and Meta's Reality Labs division has been racking up billions in losses per quarter.
Beyond the loss of a valuable talent, Carmack's departure may also highlight structural problems within the company. In his exit letter, the tech pioneer described Meta as "an org that has only known efficiency" and indicated that some at the company would be happy to be working at less than a quarter of the capacity they were capable of. These critiques seem to echo concerns raised by CEO Mark Zuckerberg earlier this year.
In a June announcement that Meta would slow hiring, Zuckerberg indicated that employees would have to work harder and said, "Realistically, there are probably a bunch of people at the company who shouldn't be here." The company then went on to fire roughly 11,000 employees in November.
While Carmack was often critical in his exit message, he also ended it on an optimistic note. The tech virtuoso said, "VR can bring value to most of the people in the world, and no one is better positioned to do it than Meta."
Carmack's departure doesn't mean that the company's virtual reality dream is dead, but it does bring into focus the difficulty of what Meta is trying to accomplish -- and the fact that the company hasn't had an easy go of things lately.
