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Facebook purchases virtual reality company Oculus in latest mega-deal

Published time: March 26, 2014 01:10
An attendee wears an Oculus Rift HD virtual reality head-mounted display (AFP Photo / Robyn Beck)

An attendee wears an Oculus Rift HD virtual reality head-mounted display (AFP Photo / Robyn Beck)

Facebook executives announced Tuesday that they had purchased Oculus VR, which has developed perhaps the most advanced virtual reality gaming headset on the market, for approximately $2 billion.

The surprise deal includes $400 million in cash, 23.1 million shares of Facebook stock, as well as $300 million in cash and stock contingent on “the achievement of certain milestones,” according to Forbes magazine.

Oculus’ virtual reality headset has set the gaming industry abuzz even before its debut on the mass market. The company’s second development kit, which has been touted as one of the most groundbreaking devices in recent memory, is currently available on presale for $350.

Exactly how virtual reality gaming fits into Facebook’s immediate plans is unclear, although in a blog post Tuesday Facebook founder Mark Zuckerberg wrote that the headset will allow for greater connectivity.

When you put it on, you enter a completely immersive computer-generated environment, like a game or movie scene or a place far away,” he wrote. “The incredible thing about the technology is that you feel like you’re actually present in another place with other people. People who try it say it’s different from anything they’ve ever experienced in their lives.”

Oculus initially began as a Kickstarter project that almost immediately attracted millions of dollars in investments from a number of sources. Among the supporters was John Carmack, creator of the pioneering “Doom” video game, left his own company to work in the startup. A Facebook press release said Oculus will continue to operate as an independent entity out of its Irvine, California headquarters.

We are excited to work with Mark and the Facebook team to deliver the very best virtual reality platform in the world,” Oculus CEO Brendan Iribe said in a statement, as quoted by Forbes. “We believe virtual reality will be heavily defined by social experiences that connect people in magical, new ways. It is a transformative and disruptive technology, that enables the world to experience the impossible, and it’s only just the beginning.”

Facebook’s stock price is up by more than 150% over the past year.

Tuesday’s announcement comes just over a month after Facebook was last in the headlines for purchasing WhatsApp, a text messaging application used for free by approximately 450 million people around the world. That purchase cost Facebook $4 billion in cash, $12 billion in stock (8.5% of Facebook), and another $3 billion in restricted shares, but gained the company an entirely new platform it can use to attract younger users.

Facebook is constantly working not to lose anybody,” Nate Elliott, an analyst with Forrester Research, told David Gelles and Vindu Goel of the New York Times last month. “Sometimes that is them innovating on their own, sometimes that’s them mimicking competitors, and sometimes that’s them buying competitors.”