Turn off the Lights

Facebook Agrees to Acquire Oculus VR

Shocking news out of the California technology sector today, Facebook has agreed to acquire Oculus VR. Though the transaction is expected to close during the second quarter this year, the price tag will be $2 billion with an earn out incentive of $300 million more.


“We’re going to focus on helping Oculus build out their product and develop partnerships to support more games,” said Mark Zuckerberg, CEO of Facebook. “Oculus will continue operating independently within Facebook.”

The virtual reality company which began over a tremendously successful Kickstarter campaign has thus far raised just under $100 million in funding over the past 18 months, much of it from venture capitalist firms. Despite those cash infusions, that largest of which tallied $75 million, Oculus has struggled in meeting the demand for their developer kits due to component scarcity. With over 75,000 orders received for the devkits, the vast majority of which were for DK1, Oculus halted production on the first devkit as a result of key components no longer being manufactured. Although the acquisition agreement has not included any details short of the finances and a shared vision between the two companies towards virtual reality; the immediate cash infusion following the acquisition will help to alleviate woes over components and scarcity. A necessary step towards commercial production; a problem which Oculus has struggled with.


¬†“We’re making a long term bet that immersive virtual and augmented reality will become a part of people’s daily lives,” added Zuckerberg.

Zuckerberg also stated that today’s acquisition is more poignantly a long term bet on the future of computing. A financially large bet at that. With $400 million up front in cash along with 23.1 million shares of Facebook common stock valued at $69.35 per share, Facebook is dishing out an approximated $2 billion (2 billion 1 million and 9 hundred eighty-five thousand in total) for the virtual reality company. Facebook has also¬†incentivized Oculus with an additional $300 million of assorted cash and stock earn out investments should the VR team reach certain milestones, stated David Ebersman CFO of Facebook. Ebersman did not elaborate on these milestones.

Although the immediate application for the approaching consumer Oculus headset will be in gaming, the company has been conscious of applications outside video games since its inception. Aligning itself with Facebook will play a large role years later as Oculus immerges into the fabric of modern civilization and realms outside of gaming.


“We started with a focus on next generation gaming, now we’re teaming up with Facebook to invent the future,” said Brendan Iribe, CEO of Oculus VR.

Facebook’s decision in acquiring Oculus is one of foresight rather than profit margin. For a company that has come to stake a strong claim in mobile applications, now drawing 50 percent of its ad revenue from mobile platforms; developing a partnership with another emergent digital platform is key to Facebook’s future and evolution. Ten years ago the company offered student bodies a social website for a selection of universities and colleges; today their platform has evolved from web-client to mobile while becoming available to the public at-large. By actively involving their own business in the development of virtual and augmented reality, Facebook is betting long term that the technology being developed today at Oculus will become a daily part of people’s lives years and decades into the future.

“For the foreseeable future the main goal that we have is just building up the product, using the different levers that Facebook has to make the product affordable to people, to make it ubiquitous, and use the different technologies that Facebook has developed to bring it to market as soon as possible,” added Zuckerberg.

Liked this article? Try These!

Comments

Meet the Author

Follow Us