In short: Essential has cut nearly a third of its employees, that is according to a new report coming out of Bloomberg. The publication cites sources within Essential who asked not to be identified. Cutting nearly 30-percent of your workforce is not a small thing, and likely means that Essential Products was running out of money. And it also comes just a couple of months after Essential had confirmed that its second generation smartphone had been cancelled. Also comes after rumors of the company being put up for sale and looking for a buyer. While Essential did not confirm the number of employees that were laid off, a spokesperson wrote in an email that "this has been a difficult decision to make. We are very sorry for the impact on our colleagues who are leaving the company and are doing everything we can to help them with their future careers. We are confident that our sharpened product focus will help us deliver a truly game changing consumer product."
Just a few weeks ago, Essential had mentioned that it was working on a new game-changing product. The company hadn't talked a whole lot about the device, but did specify that the device would be able to respond to text messages itself using artificial intelligence instead of a human actually sending text messages to those in their contacts. Of course, it is likely to have plenty more artificial intelligence and machine learning features, but that was the stand out one that Essential had talked about when talking with some publications earlier this month. The device would also have a very little screen, as Essential wants the users to mostly interact with the smartphone via voice commands. So instead of browsing through Facebook and Twitter all day, you would instead be telling your phone to post a Tweet, or call someone, etc. And that is what Essential is putting all of its resources into right now, having cancelled the PH-2 and its assistant product that was going to rival Amazon Alexa.
Background: Essential Products is coming up on its third birthday, after having been founded on November 9, 2015. And in that time, it has only put one product - well a smartphone and a few accessories for that smartphone, like a pair of USB-C headphones and a 360-degree camera. The Essential PH-1 launched last summer, and it did actually get a lot of attention. It was actually the first smartphone to sport a notch up top, and even to this day, it has the smallest notch of any smartphone out. The notch was only used for the front-facing camera, not the speaker grille, not any other sensors, just the camera. So it was very small. The rest of the phone was built from titanium, so it felt really premium in the hand. The biggest issue with the Essential PH-1 (pronounced "Phone") was the price. It was pretty pricey, considering it did only have 4GB of RAM and the cameras weren't that great. But once it dropped to $499, it began selling like hot cakes. Essential also greatly improved the cameras through software updates, and it was also one of the first to receive Android Pie back in August. In fact, it received Android Pie before many Pixel phones did.
But the question is, why did Essential Products get so much attention? There's one name that answers that question, and it's Andy Rubin. Who is the co-founder of Android, many call him the godfather of Android. And when someone who was involved in creating something like the Android operating system, does something new, it garners attention. Not only that, but the Essential PH-1 was doing things that many other smartphones were not, at the time. Including using Titanium for the build, utilizing a notch, and more. It became clear that Rubin's name wasn't enough to sell the Essential PH-1 though. And Essential also had a pretty tough year, following the PH-1 launch. Rubin actually got caught up in some sexual misconduct allegations - from his time at Google, after the search giant purchased Android - and ended up taking a leave of absence from Essential. He came back in early 2018, but that likely put a damper on sales of the PH-1 and put the team behind on developing its next smartphone. People are still interested in what Essential Products is working on, because it does have Andy Rubin, and it drastically improved the PH-1 through updates. So many were excited for the PH-2, which isn't coming now.
Impact: Laying off around a third of your workforce is not a small number. And while it is unfortunate for those employees, as they will no longer have a job, it's likely a bigger issue for Essential. The company really needs to get something out the door that it can actually start making money on. Whether that's a PH-2 smartphone or this new artificial intelligence infused smartphone that it is working on, it needs to bring in some revenue so it can keep working. According to Bloomberg, the majority of those laid off were in the hardware and sales divisions. When you are a company selling hardware, laying off a good chunk of employees in the hardware division is definitely not a good sign of what's to come.
This doesn't mean that Essential Products is done, or going out of business, but it does mean that it needs to find a way to make some money, and fast. Rubin is the type of guy that is more interested in making products than he is in making money. And that is definitely clear here with Essential. He has announced many different products, all of which are going to be "game changers" but really only one has been announced, with the others cancelled, or still being worked on. So Essential Products likely needs to get someone else in there running the show with Rubin, as the CEO of the company. Rubin does have a great vision, but if he's not careful, Essential Products could become a relic of the past.