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Comment by harmegido | Hacker News Reader

I thought the article made a good point in that $2B wasn't perhaps what Occulus was worth, but how much it required in order to consider selling. FB had to pay a premium (perhaps because of its brand in the eyes of the owners of Occulus) in order to acquire the company, but it may be worth it to them anyways.

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A premium? Figures I saw were 10M units at $300. That's 0.666x projected sales, when 2-3x is the norm for mature companies.

2-3x profit, right, not revenue? 10m units at $300 would not land anywhere near 3 billion in profits once you get to the bottom line. Lots of licensing fees coming up though.

No, revenue. For example Google's P/E (the equivalent profit ratio) is currently 31.4, and that's not including the control premium.

Comparing the cost multiple for a private company's acquisition to a P/E ratio of a public stock is way different and not really a fair comparison.

It's far from precise but I'd maintain it's useful to illustrate that if Oculus is a success, Facebook made a great buy.

Generally the starting point for any tech acquisition is 3x - 5x revenue multiplier. Occulus is hardware so their margins are lower than software, pushing them closer to the 3x mark.

Not sure what you're referring to, re: 10 million units. They haven't sold anywhere near that.

Currently their price to sales ratio is closer to 150. Facebook paid a massive premium no matter how you cut it. Even if they grow sales ten fold over the next three years, they'll still have paid a premium. I don't think the Oculus purchase can be justified in any near-term financial regard, it's a very long term bet.

"Oculus has said it will start selling a consumer product in 2014, and till now has shipped an impressive 60,000 units to developers at $350 each"

http://www.forbes.com/sites/parmyolson/2014/03/25/facebooks-...

I qualified it as 0.666x projected sales (intentionally not rounded >:), so yeah that 10M was a projected figure, which unfortunately I can't find the source for. By the end of 2015 I think Oculus will look like a steal, unless the goodwill is shot.

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