Facebook on the way to Virtual Reality-buying Oculus for $2B

Facebook announced that it had reached an agreement to buy Oculus VR, the maker of a virtual reality headset for $2 billion in a bet that social networking would one day become an immersive 3-D experience.

The deal will contain of $400 million in cash and 23.1 million Facebook shares to Oculus shareholders, social network said. "Oculus has the chance to create the most social platform ever and change the way we work, play and communicate," said Facebook's founder and CEO, Mark Zuckerberg, in a statement.

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The deal was an unexpected move by Facebook, particularly since Oculus is a small start-up that has not yet in fact shipped a product to the broader public. It is at present developing the Oculus Rift, a virtual reality headset that's been viewed as niche equipment aimed at hard-core gamers.

Mark Zuckerberg said the deal signalled virtual reality while the next step for the social media giant. "Imagine enjoying a court-side seat at a game, studying in a classroom of students and teachers all over the world or consulting with a doctor face to face, just by putting on goggles in your home. Mobile is the platform of today, and now we are also getting ready for the platforms of tomorrow," the post continued. Oculus has the chance to create the most social platform ever, and change the way we work, play and communicate."

The Oculus team said the deal shows the two companies are culturally aligned with a commitment to "changing the world" throughout virtual reality. "Mark and his team share our vision for virtual reality's potential to transform the way we learn, share, play and communicate," they said in a statement. "Facebook is a company that believes that anything is possible with the right group of people, and we could not agree more."

Further than games, Zuckerberg said virtual reality headsets may someday be used to enjoy a courtside seat at a basketball game, study in a classroom, and consult with a doctor face-to-face or shop in a virtual store. The technology also has social applications, he said.

"Imagine sharing not just moments with friend's online but entire experiences and adventures," he said.

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It is Facebook's second big achievement in as many months. Last month the social network announced that it would pay $19 billion for deal messaging startup WhatsApp, a deal that hasn't closed.

But Zuckerberg called Oculus a unique company with a most important lead on rivals in technology, engineering talent and developer interest. Sony Corp. unveiled its own prototype virtual reality headset at a game-developers conference in San Francisco.

Zuckerberg said virtual reality technology is a computing platform unto itself; compare it to personal computers that revolutionized the world in the 1970s and 1980s, and mobile phones.

Facebook Inc. said that the deal includes $400 million in cash and 23.1 million shares worth about $1.6 billion. Oculus employees are too eligible for an additional $300 million if company achieves certain targets.

Facebook Chief Financial Officer David Ebersman said Oculus was valued based on the likely returns from the video game industry alone, with the higher return expected if it can develop into communications, entertainment or other fields.

Mark Zuckerberg said Facebook intends to let Oculus continue with its roadmap of development but help out with recruiting, marketing, infrastructure and opening doors to new partnerships. He said he intends not to formulate a profit on hardware but in its place make the product affordable and ubiquitous so Facebook be able to look at generating revenue from services, software, advertising, virtual goods or other areas.

Facebook says Oculus has received more than 75,000 pre-orders for second-generation development kits for the headset at $350 apiece and the kits are to ship in July.

Sales of Oculus growth kits alone are 10 times bigger than all other headsets in the history of virtual reality, said Antonio Rodriguez, general partner of project capital fund Matrix Partners, an early investor that put $18.5 million in Oculus starting last year.

Rodriguez said virtual reality might be used to enhance virtual tours of homes for potential buyers and for getting a flavour for distant locations before planning the vacation, say to Cancun.

"Short of the sunburn and the smell of the sweet Caribbean Sea, you are getting the whole experience," he said. "They are going to change the world."

Facebook said Oculus has received more than 75,000 orders for development kits for the headset. The deal makes Facebook the latest expertise company to invest in wearable hardware that reinvents how people would one day interact with content, following Google's investment in its high-tech eye wear Google Glass.

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