According to sources close to the situation, Facebook co-founder and CEO Mark Zuckerberg started his quest to buy Oculus VR, the maker of the nifty Rift virtual reality headset, several months ago, before wrapping up the deal this past weekend. It was signed this morning.
Facebook said today that it would pay $2 billion for the startup, forking over $400 million in cash, 23.1 million shares of Facebook common stock and a $300 million earn-out in cash and stock based on future performance.
Sources close to the situation said that Facebook’s initial offer to the Irvine, Calif.-based Oculus came about three months ago at about a $1.5 billion valuation. In fact, in early February, Oculus CEO Brendan Iribe left the DICE gaming conference in Las Vegas to do a personal demo of the device for Zuckerberg.
At the time, Oculus investors — including Andreessen Horowitz, Spark Capital and Matrix Partners — had not wanted the two-year-old company to sell, considering it to be at the forefront of a new platform for consumers.
For this, Oculus had attracted a lot of interest from the media and other tech giants. Google, famous for picking up esoteric device companies, had also apparently seriously sniffed around, although sources said Facebook was the main suitor here. Other obvious buyers — Apple, Amazon, Microsoft and Sony, which has its own Project Morpheus in the arena — were not in the mix.
“I had thought it would be Google, that would have not surprised me,” said one person close to the situation. “But Facebook sees this as a major new platform for the future and wants to build on it.”
Indeed, and not for just gaming, as some have noted already. Many think there are a myriad of ways such devices can be deployed, well beyond games, in the same way tablets and even smartphones have developed.
Sources said the push to complete the deal happened this past weekend, with Zuckerberg leading the effort. It’s not dissimilar to his fast push to buy WhatsApp for $19 billion recently and, earlier, Instagram for just over $1 billion. Also involved was Amin Zoufonoun, Facebook’s VP of corporate development, who had also worked on the Instagram deal.
“There are must-haves for Mark and this was not a reaction, but a plan,” said one source inside Facebook.
For the uninitiated: Users wear the Rift on their heads, and it acts as both a monitor and partial controller. A connected PC or Android device does the processing to create a three-dimensional virtual world where turning one’s head in the real world changes their focus in the virtual world.
Although the Irvine, Calif.-based startup initially focused on gaming, since that round it has hinted that the Rift may also be good for non-gaming applications, and that seems to be Facebook’s interest here.
“Mobile is the platform of today, and now we’re also getting ready for the platforms of tomorrow,” Facebook CEO Mark Zuckerberg was quoted as saying in a press release. “Oculus has the chance to create the most social platform ever, and change the way we work, play and communicate.”
Indeed, another person familiar with the deal said that Facebook was on a most definite futuristic bent after missing the chance to own a big smartphone or tablet device of this era.
“There is more to come here,” said the person. “It’s a bet on the future of the future.”
In a call today about the acquisition, Zuckerberg said that Facebook was still not a hardware company, but would make its money mostly from software and services, as well as leveraging its many relationships on the social network.
That said, it now owns a pricey piece of the Internet of Things.
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