Facebook Inc (NASDAQ:FB) and Oculus Rift may not seem like a match made in heaven, but of course both companies say it makes sense. And now they're both defending their decision for Facebook to buy Oculus for $2 billion.
Oculus, the future of computing
Facebook Inc (NASDAQ:FB) has been casting a rather broad net of late, and as a result, many investors are asking why. Is it because the company is in trouble? According to Facebook, it is gazing beyond the current computing world and into the computing world of the future. We heard recently that the company was interested in buying a drone maker—another seemingly odd purchase at first. But drones will likely be a major part of the future of technology.
With the purchase of Oculus, Facebook is essentially banking on virtual reality becoming the next big thing. According to Oculus VR itself, Facebook representatives visited them a few months ago to explore how they could work together. The company says they are "culturally aligned [with Facebook] with a focus on innovating and hiring the best and brightest."
Facebook Inc (NASDAQ:FB) CEO Mark Zuckerberg said in a statement that they intend to expand Oculus to uses "for many other experiences." He suggested that it could be used for virtually attending a sporting event, attending class or even medical consultations. He believes that virtual reality will become the next major computing platform, following in the footsteps of mobile, which is on the rise right now.
Facebook still strong in mobile
The social network did reassure investors that its mobile platform is still doing well. Facebook Inc (NASDAQ:FB) said more than 1 billion people are using its mobile app currently, compared to 945 million at the end of the fourth quarter. The company also sees more than half of its revenue from mobile. In other words, Facebook isn't waiting until its mobile platform is in trouble—like it did with its desktop platform. The company is attempting to plan ahead with a $2 billion gamble.
In a research note dated March 25, 2014, Raymond James analysts Aaron Kessler and Ben Cohen note that the acquisition of Oculus probably won't meaningfully contribute to Facebook Inc (NASDAQ:FB)'s revenue in the near term. Also there's no guarantee that virtual reality will indeed be the next computing platform. However, they like the social network's "forward thinking strategy as it positions itself for the platforms of the future."
What the sell side says about Facebook's acquisition
Stifel analysts are also positive on Facebook Inc (NASDAQ:FB)'s acquisition. However, the sell side sees this as more of a warning sign for the social network. They believe Facebook must be in trouble, or else it wouldn't have bought Oculus. In addition, there are plenty of other similar acquisitions which didn't turn out too well.
An article in the Salt Lake Tribune points to lessons learned from Star Trek: The Next Generation's episode entitled "The Game." In that episode, the warning is that people would use a gaming technology for things other than games, and the result is a bunch of mind controlled crew members. It sort of sounds like what Facebook Inc (NASDAQ:FB) wants to do with Oculus' technology.