management remained generally uninterested and the team struggled for resources. Eventually they approached Sculley with the idea of spinning off the group as a separate company, which occurred in May 1990. In 1990 Marc Porat, Andy Hertzfeld, and Bill Atkinson[5] in Mountain View, California founded it. Apple took a minority stake in the company, with John Sculley joining the General Magic board.

Porat, Hertzfeld and Atkinson were soon joined at General Magic by Susan Kare, and most of Apple's System 7 team, including Bruce Leak, Darin Adler and Phil Goldman.

During the early 1990s, Joanna Hoffman was vice president of marketing. In 1990, Porat wrote the following note to Sculley: "A tiny computer, a phone, a very personal object... It must be beautiful. It must offer the kind of personal satisfaction that a fine piece of jewelry brings. It will have a perceived value even when it's not being used... Once you use it you won't be able to live without it."

The company achieved many technical breakthroughs, including software modems (eliminating the need for modem chips), small touchscreens and touchscreen controller ASICs, highly integrated systems-on-a-chip designs for its partners' devices, rich multimedia email, networked games, streaming television, and early versions of e-commerce.

According to former General Magic employee Marco DeMiroz, it was the "Fairchild [Semiconductor] of the 90s."

A documentary film about the company opened at the Tribeca Film Festival April 20, 2018. It was later shown at the SFFilm Festival in San Francisco on November 3, 2018. The company founders had hired filmmakers including Sarah Kerruish to document their development process in the 1990s, and Kerruish included some of that original footage of General Magic's offices in the film. The film includes interviews with Marc Porat, Andy Hertzfield, Joanna Hoffman, Megan Smith, and Tony Fadell.