When Facebook Inc (NASDAQ:FB) and Oculus revealed that the former was buying the latter, it sent ripples of anger throughout the gaming and technology community, and rightfully so. Those who funded Oculus through Kickstarter were angry that their money had basically gone toward getting the company noticed by Facebook. In fact, they were so angry that Oculus employees began receiving death threats.
But is there a silver lining? Mail and Guardian Chief Technology Officer Alistair Fairweather things so, according to his post on TechCentral.
Facebook’s acquisition good for Oculus
He says by acquiring Oculus, Facebook Inc (NASDAQ:FB) has opened up a world of opportunities. He thinks the acquisition will mean that more gamers than previously expected will learn about the company’s virtual reality headset. He also thinks it will make it possible for more of them to get their hands on those headsets, which are currently available only to game developers.
In addition, he notes that it is extremely hard to scale a hardware company without a big name behind the product. Research and development costs rack up very quickly. Oculus raised almost ten times its initial target of $250,000 through Kickstarter and an additional $90 million from venture capital firms. However, it’s been two years since the original money was raised, and we still don’t even know when the consumer version will be out. He thinks the infusion of capital from Facebook Inc (NASDAQ:FB) will go a long way toward speeding up development of the headset.
Facebook’s Zuckerberg as a visionary
Of course there’s no denying that it seems odd a social network would be interested in Oculus VR. Facebook Inc (NASDAQ:FB) doesn’t offer any devices, so it seems like an odd purchase. In fact, many have said CEO Mark Zuckerberg must be crazy to make such an acquisition. However, Jeff Reeves of MarketWatch thinks it was a smart move for Facebook to buy Oculus VR.
He notes that it’s important for technology companies to continue looking beyond what they currently do to discover the next big thing. He suggests that virtual reality chats and conferences could be the wave of the future. As a result, he thinks this move could be a smart one, although it will be some time before we know for sure.
Facebook’s acquisition compared to Google’s, HP’s past acquisitions
He looked back at Google Inc (NASDAQ:GOOG)’s acquisition of Android in 2005. The search giant purchased it for about $50 million, and it took a while before that deal to really do anything. In 2007 when the first iPhone came out, Android didn’t get much attention. Now though, Google’s Android dominates the market, as it runs on about 80% of the world’s devices.
He also noted that it may have seemed a bit odd for Google Inc (NASDAQ:GOOG) to buy YouTube in 2006 when it didn’t really have any revenue. Estimates on YouTube’s revenue now are around $5.6 billion a year, which would be over 10% of Google’s total ad revenue.
Of course he does note that Facebook Inc (NASDAQ:FB)’s acquisition could always turn out very bad. He pointed to Hewlett-Packard Company (NYSE:HPQ)’s purchases of Compaq and Palm as cases in point of how acquisitions could go wrong. But whatever happens with it, he said the price was right because Facebook could easily afford it and it could be a gamble that pays off.
Did Facebook Overpay for Oculus?
Many analysts have been saying that Facebook Inc (NASDAQ:FB) paid too much for Oculus VR. However, Needham and Company doesn’t think so. The social network paid $2 billion for the virtual reality headset maker. Analyst Laura Margin notes that when Facebook acquired Instagram, investors thought it had overpaid. However, teenagers have been gradually shifting away from Facebook and toward Instagram, so now the purchase looks cheap.
In addition, she notes that other companies reportedly tried to purchase Oculus VR, which demanded a premium price in order for the deal to be completed quickly. She believes it gives Facebook Inc (NASDAQ:FB) an answer to Google (NASDAQ:GOOG)’s Glass.
