Facebook steps into Virtual Reality World by Acquiring Oculus VR

2014-03-27
Published : Mar-2014

For $2 billion, Facebook Inc will purchase maker of virtual-reality glasses, Oculus VR Inc for gaming. Facebook is making its way into the fast-growing wearable devices arena with its first-ever hardware deal.

The world’s largest social networking site Facebook was late to recognize the shift to mobile devices and the company’s revenue has only recently begun to recover from the late start.

Many people in the industry believe that wearable devices could represent the next big platform shift. For several years, Google Inc has been testing a stamp-sized electronic screen mounted to a pair of eyeglasses, which is commonly known as Google Glass. Google last week introduced an effort to develop computerized wristwatches. Facebook said that virtual-reality technology could emerge as the next communications and social platforms.

According to Mark Zuckerberg, the history of their industry is that every 10 or 15 years, there’s a new major computing platform, whether it’s the Web, the PC or mobile phones. They are making a long-term bet that augmented, virtual and immersive reality will become a part of people’s daily life.

He added, wearing the Oculus goggles was different from anything he has ever experienced in his life. Facebook did not intend to try to make a profit from sales of the devices over the long term neither is it interested in becoming a hardware company. Facebook’s services and software would continue to serve as the company’s underlying business, potentially generating revenue on Oculus devices through everything from advertising to sales of virtual goods. However, Oculus will operate as an independent company.

In addition to game makers, Oculus has garnered some interest from developers keen on creating apps in areas such as education, architecture, marketing and automobiles.

Facebook’s shares in the past six months increased 25 percent which were down nearly 1 percent at $64.36.

This acquisition makes Oculus VR one of the most successful projects or companies to ever emerge from the Kickstarter program that has helped to attract small investments from the public which includes Pebble smartwatch.

In 2013, Facebook ended with $11.45 billion in cash and marketable securities. The acquisition of WhatsApp for the company’s $19 billion includes $4 billion in cash. Oculus VR deal comprises of 23.1 million shares of Facebook common stock and $400 million in cash. David Ebersman, Finance Chief of Facebook said that the price of the deal was based mainly on the gaming business, however Facebook believed the technology could be worth multiples of its actual purchase price if Facebook succeeds in extending it into other areas such as communications and entertainment.

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