Another BIG acquisition for Facebook

Facebook today announced that it has reached a definitive agreement to acquire Oculus VR, Inc., the leader in immersive virtual reality technology, for a total of approximately $2 billion. This includes $400 million in cash and 23.1 million shares of Facebook common stock (valued at $1.6 billion based on the average closing price of the 20 trading days preceding March 21, 2014 of $69.35 per share).  The agreement also provides for an additional $300 million earn-out in cash and stock based on the achievement of certain milestones.

Oculus Rift Headset

Oculus is the leader in immersive virtual reality technology and has already built strong interest among developers, having received more than 75,000 orders for development kits for the company’s virtual reality headset, the Oculus Rift. While the applications for virtual reality technology beyond gaming are in their nascent stages, several industries are already experimenting with the technology, and Facebook plans to extend Oculus’ existing advantage in gaming to new verticals, including communications, media and entertainment, education and other areas.  Given these broad potential applications, virtual reality technology is a strong candidate to emerge as the next social and communications platform.

“Mobile is the platform of today, and now we’re also getting ready for the platforms of tomorrow,” said Facebook founder and CEO, Mark Zuckerberg. “Oculus has the chance to create the most social platform ever, and change the way we work, play and communicate. Imagine enjoying a court side seat at a game, studying in a classroom of students and teachers all over the world or consulting with a doctor face-to-face — just by putting on goggles … Imagine sharing not just moments with your friends online, but entire experiences and adventures.” writes Mark Zuckerberg in a Facebook post, explaining why his company is spending up to $2.3B to buy a VR headset maker.

It is only until you try an Oculus headset that you realize why this new platform for games is, obviously, worth every penny of the $2 billion price tag. It is one of those rare products where describing it in mere words doesn’t come anywhere near to realistically depicting how incredible the experience of wearing one is.

It’s one of the most completely bizarre, wonderful, unique, laugh-out-loud, “holy cow!” video experiences you have ever had. Most of whom had the chance to have tried it were blown away by this product at CES, the big computer expo in Las Vegas earlier this year.

Within seconds of donning the new headset you know this is a game changer, in the sense that it will literally change games forever. Once the goggles were in place — and they fit over your glasses, if you wear them! — you are instantly inside the cockpit of a military space fighter, launching into a gloomy, asteroid-filled galaxy of hostile aliens and impossibly vast ships. (See the video of Eve Valkyrie game below.)

There was just one question in my head: Why does this company still exist? It should have been acquired by Microsoft or Sony or Nintendo or EA or Take Two or any of the other large gaming companies months ago. The firm has taken about $115 million in funding from investors like Andreessen Horowitz and backers on Kickstarter. That sum would imply a valuation in the billions.


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