Facebook continued its billion-dollar buying binge Tuesday, forking over $2 billion for Oculus VR, a fledgling start-up in virtual-reality technology.
The deal calls for $400 million in cash and 23.1 million shares of Facebook common stock worth about $1.6 billion. The accord includes $300 million more in cash and stock based on incentives.
“We view this as a software and services thing, a network where people can communicate and buy things,” Facebook CEO Mark Zuckerberg said in a conference call Tuesday. “That’ll be where the business will come from.”
The head-gear-mounted technology, a hit at the Consumer Electronics Show in Las Vegas in January, is the brainchild of Palmer Luckey. He was 21 at the time of CES.Brendan Iribe is CEO and co-founder.
“We believe virtual reality will be heavily defined by social experiences that connect people in magical, new ways,” Iribe said in a statement.
Oculus board member Antonio Rodriguez, a general partner at VC firm Matrix Partners, says Facebook will let Oculus operate as an independent business — as it has previous acquisitions.
Facebook’s play for Oculus continues its aggressive moves beyond mobile advertising.
Although Oculus has generated buzz by presenting lifelike video-game experiences, the company has shown examples in other realms such as entertainment, which might appeal to the social-networking giant. “(Facebook) sees broader applicability than just gaming,” says Edward Jones analyst Josh Olson.
Oculus is Facebook’s second multibillion-dollar blockbuster purchase this year. In February, it announced plans to acquire messaging app WhatsApp for $19 billion.
Having focused solely on the software side of the industry, Facebook’s plunge into a hardware business such as Oculus is surprising, says Gartner analyst Brian Blau.
“(Facebook has) talked about not wanting to be a hardware company,” Blau says. “They want to do software and infrastructure, and they’re clearly focused on social. Virtual reality isn’t any of those things.”