Facebook buys Oculus VR for $2 billion

If it is paywalled for anyone:

Facebook Inc. agreed to to pay nearly $2 billion in cash and stock to acquire virtual reality goggle maker Oculus VR Inc.

Facebook agreed to pay $400 million in cash and 23.1 million shares of the company's stock. At Tuesday's close of $64.89, the stock portion would be worth $1.5 billion.

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

Facebook's move to acquire Oculus comes roughly a month after the company agreed to pay $19 billion in cash and stock to acquire smartphone-messaging app WhatsApp Inc. The company in 2012 generated headlines when it agreed to pay $1 billion in cash and stock to buy Instagram, a popular app used to help people share photos.

The latest deal, however, isn't for an app but for a hardware maker. Oculus VR is a startup that is trying to popularize virtual reality with its Oculus Rift goggles. Oculus has said it intends to charge $350 for the new version of the headset, which is due to ship to developers in July.

Earlier this month, The Wall Street Journal reported the company began accepting orders for a new development kit. The new device marks an important step toward the eventual launch of consumer products, Oculus said.

Oculus was launched after founder Palmer Luckey raised more than $2.4 million in funding from a Kickstarter campaign to help fund development of the company's first product.

Oculus, in a blog post, said Mr. Zuckerberg and other executives from Facebook visited the startup's office "a few months ago" to discuss how the two companies could work together.

The company said that while it "might not seem obvious" why Oculus agreed to partner with Facebook, the companies "want to contribute to a more open, connected world; and we both see virtual reality as the next step."

On Tuesday, Facebook said Oculus intends to maintain its headquarters in Irvine, Calif., and will continue to develop the Oculus Rift. The transaction is expected to close in the second quarter.

Facebook shares, in after-hours trading, recently slipped 54 cents to $64.35.

—Ian Sherr contributed to this report

It's for 400M in cash w/ 1.6B in Facebook stock.

I feel like Facebook is really trying to get all the mileage it can out of its stock.

This is pretty saddening news and happened before Oculus Rift went mainstream. It really had the potential to take off but I now think that the main players will jump ship once options vest.

This valuation feels extremely low for a leader in a growth sector, and that is before we consider the fact that facebook's stock is probably overvalued, and the team at Oculus are smart enough to know that.

Possible reasons for the valuation:

1. Sony's announcement. It really wasn't a big surprise, but I can imagine this spooked some people involved with Oculus

2. Production delays or other unexpected development issues - but what could they have been?

3. Oculus has always seemed more of a PC product, so perhaps there are factors in the PC market we are unaware of that they know better?

4. Valve. I'm not sure how they factor into this, but there are a number of possibilities. Oculus team not liking them? Valve working on a competitor? Facebook trying to position themselves as a buyer?

What are your thoughts?