Facebook to buy Oculus for $2 billion

The social network is looking toward the future by buying the maker of the virtual reality headset, the Oculus Rift.

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The Oculus Rift headset James Martin/CNET

Facebook announced Tuesday that it has agreed to buy the virtual reality technology company Oculus VR, which makes the Oculus Rift headset, for about $2 billion in cash and stock.

The 18-month-old Oculus is at the forefront of the emerging VR industry, getting its start on Kickstarter, and has made an open-source sweetheart out of the Oculus Rift. The company just announced its final development kit for the Rift last week at the Game Developers Conference in San Francisco, ahead of its official release, the date of which is unknown.

Facebook said that with the acquisition, it plans to extend Oculus' virtual reality capabilities beyond gaming into areas such as communications, media, entertainment, and education. Facebook, according to CEO Mark Zuckerberg, views virtual reality as the next big thing in social.

"Mobile is the platform of today, and now we're also getting ready for the platforms of tomorrow," Zuckerberg said in a statement. "Oculus has the chance to create the most social platform ever, and change the way we work, play, and communicate."

The deal, valued at about $2 billion based on a Facebook stock price of $69.35, includes $400 million in cash and 23.1 million shares of Facebook common stock, and allows for an additional $300 million earn-out in cash and stock based on milestones. The purchase also marks Facebook's first major consumer-facing hardware play for the usually software-oriented company.

Oculus is based in Irvine, Calif., and was founded by 21-year-old Palmer Luckey in 2012. The company launched a Kickstarter campaign to fund development and raised more than $2.4 million from online backers. Oculus will remain in its current location and continue to work on the Oculus Rift.

Facebook's latest billion-dollar buy closely follows its deal to purchase messaging application WhatsApp for $19 billion in cash and stock. The social network also made headlines two years ago when it picked up Instagram for about $1 billion. The photo and video app has ballooned to 200 million monthly active users under Facebook's care.

The $2-billion deal for Oculus is expected to close in the second quarter of this year.

 

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