Seeking Alpha

Google reportedly showed interest in Oculus; Zuck calls its tech superior

  • Google (GOOG -0.4%) appears to have "seriously sniffed around" Oculus VR before Facebook (FB -3.8%) closed a deal to buy the VR headset maker, Kara Swisher reports. Meanwhile, The Verge reports "several big companies" had made overtures to Oculus (no names are given), and that the startup's VC investors "offered the company more money to go it alone."
  • Over time, Oculus' Rift headset, which Facebook hopes will be used for many non-gaming applications, could compete against Google Glass. For now, they address different markets: Rift is much heavier/bulkier than Glass, but also provides an immersive VR/3D gaming experience.
  • During a CC, Mark Zuckerberg asserted the Rift is "way ahead" of rival products such as Sony's (SNE -0.4%) Morpheus (due in 2015), and that Oculus' talent is unmatched. Oculus CEO Brendan Iribe argues Facebook's resources will help make the Rift cheaper (the dev. kit currently goes for $350).
  • Stacy Higginbotham remains an Oculus skeptic: While calling a demo she tried out "immersive and neat," she adds it was "nothing like real life." Brad Stone thinks "there's nothing social" about headsets that "[blot] out absolutely everything around you."
  • Jim Edwards, defending the deal, calls the Rift the kind of product for which words can't describe "how incredible the experience of wearing one is." VC Chris Dixon, who backed Oculus, makes a similar case.
  • Some game developers are unhappy about the deal. As are some of the Kickstarter backers who poured $2.4M into Oculus, and only have t-shirts and dev. kits to show for it. Facebook has joined several other Internet momentum stocks in selling off in the wake of King's disappointing IPO.
  • Previous: Facebook buying Oculus, more details
Comments (23)
  • crash9010
    , contributor
    Comments (141) | Send Message
     
    Some of those people quoted seem to have no clue what the Rift is or it's potential.
    26 Mar 2014, 01:14 PM Reply Like
  • MEKhoury
    , contributor
    Comments (271) | Send Message
     
    Agree -- it sounds like the people who scoffed at the automobile.
    26 Mar 2014, 01:16 PM Reply Like
  • Gowiththeflow
    , contributor
    Comments (27) | Send Message
     
    This is funny. Apparently every purchase that FB makes was looked over by GOOG first. They spend a mind blowing 19B on whatsapp and GOOG was looking at it. They spent 2B on this divers goggles looking glass for gamers and GOOG was strangely looking at it first.

     

    Did it ever occur to Mark Z That Google is trying to sabotage them by "looking" at companies first and having them buy it at ridiculous valuations?
    26 Mar 2014, 01:23 PM Reply Like
  • Stone Fox Capital
    , contributor
    Comments (6364) | Send Message
     
    Great point b/c we know that GOOG likes to waste money just as much as anybody else. Outbidding them isn't exactly a good sign for FB longs.

     

    To the other posters, I'm not sure the people quoted have no clue about the potential of the Rift or at least the space, but the question is how that potential is going to be developed as part of a social media and messaging giant.
    26 Mar 2014, 01:27 PM Reply Like
  • Joe Albano
    , contributor
    Comments (314) | Send Message
     
    Yeah and we'll never do everything we need to on a screen 4.5" wide...oh wait my phone is going off...
    26 Mar 2014, 01:51 PM Reply Like
  • DanoX
    , contributor
    Comments (2752) | Send Message
     
    Under that dumb theory Facebook somehow missed out on money makers like Motorola and Nest.
    26 Mar 2014, 02:20 PM Reply Like
  • Nicholas Pardini
    , contributor
    Comments (423) | Send Message
     
    Or maybe Facebook is just leaking rumors to make their ridiculous purchase prices for their acquisitions seem rational.
    26 Mar 2014, 07:21 PM Reply Like
  • Kyle Spencer
    , contributor
    Comments (1128) | Send Message
     
    My initial reaction was negative on this acquisition, but the the gaming community appears to regard Oculus is a full fledged paradigm shift. With 40,000 developers signed up to build out the ecosystem, $2 billion is a bargain. I'm not so certain about WhatsApp.
    Oculus Rift: http://bit.ly/1mvcahe
    26 Mar 2014, 02:08 PM Reply Like
  • DanoX
    , contributor
    Comments (2752) | Send Message
     
    It is a utter waste of money because the first real useable to the public VR will only come from a company that can built both hardware and software at a high level with focus, execution and mountains of money and that isn't Facebook or Google.
    26 Mar 2014, 02:24 PM Reply Like
  • benitus
    , contributor
    Comments (1972) | Send Message
     
    Again, Zuck has panicked just because GOOG was sniffing it out. If GOOG continues sniffing at every other startups, Zuck will clean out FB and its shareholders with his purchases. How desperate can he be? He must know something about FB that we don't, and that doesn't seem good at all. But I love it, as my short plays on FB are ringing up my cash register. Let's drink to Zuck and FB for making our dreams come true. Short FB forever!!
    26 Mar 2014, 03:47 PM Reply Like
  • futuretrade
    , contributor
    Comments (820) | Send Message
     
    I'll never understand investors, Zuckerberg needed to diversify Facebook now that he's doing so investors panic and sell off. Time will tell if they are wrong which I believe they are. >> I continue to be long on Facebook.
    26 Mar 2014, 04:31 PM Reply Like
  • Bouchart
    , contributor
    Comments (784) | Send Message
     
    Dear Mr. Zuckerberg,

     

    I have a startup business and Google wants to buy it outright. For the low, low price of $200 million you can buy it instead. It has no revenue or customers but I assure you it's the next big thing. I'll let you know where to mail the check.

     

    Sincerely,
    Bouchart
    26 Mar 2014, 06:08 PM Reply Like
  • benitus
    , contributor
    Comments (1972) | Send Message
     
    Bouchart...you forgot to mention that GOOG is in talks with you but you prefer Zuck because he is fair with his offers, i.e. a fair buyer.
    27 Mar 2014, 07:50 AM Reply Like
  • futuretrade
    , contributor
    Comments (820) | Send Message
     
    "It has no revenue or customers" Google would not want it nor would Facebook. Can it be called a business? Your analogy makes no sense, did you buy some marijuana stock and smoke the profits?
    26 Mar 2014, 06:44 PM Reply Like
  • Bouchart
    , contributor
    Comments (784) | Send Message
     
    Are you saying that Oculus has revenue? I'd like to know how much. From what I've read they haven't sold any product to end users yet.
    26 Mar 2014, 06:58 PM Reply Like
  • benitus
    , contributor
    Comments (1972) | Send Message
     
    Bouchart....hear, hear, my friend.
    27 Mar 2014, 07:51 AM Reply Like
  • futuretrade
    , contributor
    Comments (820) | Send Message
     
    I must admit the amount of money spent for the acquisition of Oculus seems a little outlandish but can anyone know what Zuckerberg has in mind for this company? So far he's taken share price to new heights, now with these new acquisitions it remains to be seen if he's crapped down his leg. I for one will stick with facebook until share price starts digging into my profits I've made from FB. Though it seems that Zuckerberg might be nuts, I believe he is driven by one consuming thought "To connect the whole world"
    27 Mar 2014, 11:52 AM Reply Like
  • futuretrade
    , contributor
    Comments (820) | Send Message
     
    Bouchart>>>> Oculus VR sold 60,000 units of the first development kit at $300 per unit, totaling $18 million in revenue. In February 2014, the company had to stop production of this version as demand exceeded company's expectations, and few components used in the development kit were no longer manufactured.

     

    In January 2014, Oculus VR showcased the prototype of its virtual reality headset at the annual Computer Electronic Show (or CES), after making improvements to latency and blurring, as well as adding a new positional tracking using an external camera. The Rift Development Kit 2 can be pre ordered for $350 and it will be shipped in July 2014. If I assume that Rift Development Kit 2 sells at least 100,000 units in 2014, then it can generate $35 million revenue this year
    27 Mar 2014, 01:56 PM Reply Like
  • RationalThought35
    , contributor
    Comments (5) | Send Message
     
    futuretrade :: I would agree with your point of diversification.

     

    While the $2B price tag is excessive, it is really $400M in cash and the rest in stock [at current price]. So FB is using inflated currency, which would seem to be rational thing to do with inflated currency. The immediate problem is that it is an admission of being overvalued [by the company], hence the extreme reaction in the stock today (which seems to be an over reaction -- erasing approx $11B in market cap today and $18B in the last 2 days).

     

    Financials aside, on the Oculus technology, I can certainly see it being applied to various markets [diversifying] beyond just social media (as we see it today).

     

    Since it is [essentially] a 3D display [output] device [with viewer motion tracking/feedback, simplifying it knowingly], virtually any data source can be mapped on to the display for visualization.

     

    Sample [current] use cases :
    - immersive gaming [initial stated market also most obvious]
    - augment reality [ HUD for real world, ala Google Glass]
    - entertainment [VR game shows, VR "reality" TV, etc]
    - movies - not just viewing, but more importantly for content creation / post production processing
    - medical imaging/visualization - combined with real time MRI, ultra sound, etc.
    - real time visualization / manipulation of analytics data [falls in the "Big Data space"
    - oil/gas exploration data visualization
    - automotive / aerospace
    - military use cases [of course]
    - sports [night vision skiing anyone ?]
    - and what new technology is not first exploited by the porn industry :-)

     

    Many of you will notice that most of these already exist today and that is the point. There already exist many applications and use cases that this can fit into, with the direct differentiation of being immersive as opposed to limited by screen size and a 2D surface.

     

    in terms of form factor, I would expect that it will evolve by the time it is released in the next 1 - 2 yr timeframe. The model seen today will be fine for total immersion, but it would not be unreasonable to see VR sunglasses [a variation on google glass] for AR / HUD type of use cases.

     

    Most smart phones and tablets already have sufficient processing to output to HDMI at full HD. The mobile processor / SoC roadmaps show significant improvements in both cpu and graphics processing and display capabilities. So going mobile should not be a huge barrier.

     

    Given the resources that FB "can" bring to Oculus, it could certainly help push FB into more diverse markets and not be limited to just "facebook page". FB seems to want to follow Google's lead in exploring markets beyond "search".

     

    Long term I would think this is very constructive, short term expect a lot of volatility.

     

    Keep in mind there is both a fool "and" a genius on "both" sides of any transaction :-)
    26 Mar 2014, 09:39 PM Reply Like
  • futuretrade
    , contributor
    Comments (820) | Send Message
     
    RationalThought35, I like the way you think! Very Rational. lol....
    27 Mar 2014, 12:27 PM Reply Like
  • Disturber
    , contributor
    Comments (183) | Send Message
     
    Just a thought from a distance. FB is simply not making enough money to justify these wild eyed expansions. Twenty-one billion dollars for two businesses that are interesting, sure, but which have no revenue and which are burning through capital and will continue to do so as they strive for viability and ultimately profitability. Both businesses are in highly competitive spaces and while they may have the current edge, so did AOL, HP and dozens of others. In the meanwhile, FB is dissipating cash and diluting its share holdings acquiring revenue free companies that may or may not triumph in their spaces. Driving these businesses is going to require costly management, overhead, and investment that present a considerable risk of dissipating the focus and resources of FB.

     

    Many acquisitions even by companies more mature than FB fail. Cisco has a whole warehouse of companies that were paid for and which failed to achieve the dream. In fact, in my long experience, failed acquisitions are more common that successful acquisitions especially where they show no likelihood of accretion in the near future. The clever acquirers don't shoot for the moon but rather accessorize their existing businesses. Google's acquisition of robotics companies followed a great deal of very clever work on robotic automobiles, a future that is becoming ever clearer.

     

    This is not to say that Zuck isn't a very smart fellow and that FB has not assembled a sterling group of executives. However, success is ultimately a product of luck, focus and hard work. Spreading too thin is a recipe for disaster.

     

    Disturber
    26 Mar 2014, 09:55 PM Reply Like
  • Toni S.
    , contributor
    Comments (20) | Send Message
     
    Zuckerberg is a visionary. He has to think out of the box. I mean, look what he's done with FB. Who can resist it? Everybody gets their 15 minutes of fame...everyday. Build it and they will come...the advertizers, the gamers. The world has changed...we have to move with it.
    27 Mar 2014, 04:21 AM Reply Like
  • futuretrade
    , contributor
    Comments (820) | Send Message
     
    Toni S. >> Hear, Hear, I agree totally!
    27 Mar 2014, 12:31 PM Reply Like
DJIA (DIA) S&P 500 (SPY)
ETF Hub
ETF Screener: Search and filter by asset class, strategy, theme, performance, yield, and much more
ETF Performance: View ETF performance across key asset classes and investing themes
ETF Investing Guide: Learn how to build and manage a well-diversified, low cost ETF portfolio
ETF Selector: An explanation of how to select and use ETFs