Facebook takes page out of Google playbook with Oculus deal

Wed Mar 26, 2014 4:09pm EDT
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By Alexei Oreskovic

SAN FRANCISCO (Reuters) - Does Facebook Inc have Google envy?

The social networking company's $2 billion acquisition of Oculus VR, a maker of virtual reality goggles, took Wall Street and technology observers by surprise, not least because of the hefty price for a company with no real revenue and untested technology.

But Facebook's desire to bet on "the platforms of tomorrow," as Chief Executive Mark Zuckerberg described the deal on Tuesday, also marks a broadening of ambition for a company that has until now focused mainly on bolstering its existing service or defending its turf from immediate threats.

It's a strategy more often associated with Facebook's arch-rival Google Inc, which has established a track record of making early bets on the next big thing. Google acquired the Android software that now powers three out of four smartphones in 2005 when PCs were dominant, and Google currently has projects under way involving self-driving cars and robots.

"It's really the first acquisition of theirs which is really thinking about the future, versus the next wave of products or defensive," venture capitalist Jeff Clavier said of Facebook's deal for Oculus.

"I don't know whether Oculus is as exciting as driverless cars or things like that in terms of impact. But at least it's a future technology that will definitively be mass market at some point," said Clavier, the founder and managing partner of Palo Alto-Calif-based SoftTech VC.

Investors seemed unsure about Zuckerberg's crystal ball. Shares of Facebook were down more than 6 percent at $60.70 in late trading on Wednesday.

The deal, which comes less than two months after Facebook announced plans to acquire Whatsapp for $19 billion in cash and stock, raised fears about the beginnings of an unchecked spending spree.   Continued...

Software designer Julian Kantor (L), who created "The Recital", takes a picture of Jonathan Feng using the Oculus Rift virtual reality headset to experience his program during E3 in Los Angeles, California in this June 12, 2013 file photo. REUTERS/Gus Ruelas/Files