In a surprise move, Facebook announced on
Tuesday that it had reached a $2 billion agreement to buy Oculus VR, the
maker of a virtual reality headset, in a bet that technology commonly
associated with science fiction can help eventually turn social
networking into an immersive 3-D experience, Nick Wingfield and Vindu Goel write in The New York Times.
The announcement comes just over a month after Facebook made waves by
revealing it would buy the mobile messaging app WhatsApp for up to $19
billion.
The deal was particularly unexpected
because Oculus, a small start-up that began as a Kickstarter project, is
working on what some view as a niche technology aimed at serious video
game players. For his part, Mark Zuckerberg, the founder and chief
executive of Facebook, said the deal reflected his belief that virtual
reality could be one of the “platforms of tomorrow.” Facebook is paying
$400 million in cash and about $1.6 billion in stock for Oculus, with up
to $300 million more depending on Oculus’s performance.
Facebook is the latest Silicon Valley company
to invest in wearable hardware that reimagines how people will one day
interact with information and other forms of content. But the deal had
some analysts questioning Facebook’s strategy. One said the fit
was “poor,” while another viewed virtual reality as having the same
story as it did two decades ago, one of “hip, hype and hope.”
Elite venture capitalists stand to reap huge rewards from the deal, but many who supported Oculus in its early days will walk away empty-handed, William Alden writes in DealBook.
Those would be its backers on Kickstarter, the fund-raising platform
that Oculus used to raise $2.4 million in September 2012. And at least
one of those supporter was not happy with the deal, writing on his blog,
“I did not chip in ten grand to seed a first investment round to build
value for a Facebook acquisition.”
WHAT OTHERS ARE SAYING | From The Verge:
“The acquisition of Oculus seemingly comes out of nowhere: the company
just demoed its most recent version of the Oculus Rift development kit
at GDC 2014 to much fanfare. Oculus has been steadily moving towards a
consumer product, and Facebook’s resources can only help to push that
mission along.”
Variety writes: “Keep in mind Oculus Rift is really just a screen,
albeit one strapped to a headset that fits around your eyeballs. While
Facebook’s entry into the hardware business may make it no different
than Apple with its iPad, there’s also a comparison to be made with
exhibitors like AMC or Regal.”
Felix Salmon at Reuters writes:
“Is it too early to declare that Zuckerberg has ambitions to become the
Warren Buffett of technology? Look at his big purchases — Instagram,
WhatsApp, Oculus. None of them are likely to be integrated into the core
Facebook product any time soon; none of them really make it better in
any visible way.”
News of the deal may have leaked about a month ago. From a Reddit post:
“So no way to confirm this, but my friend works in the same building as
Oculus, and he ran into Mark Zuckerberg taking the elevator to Oculus’s
floor.”
A LIKELY HEIR IS LEAVING JPMORGAN | Once considered a possible heir to Jamie Dimon, the chief executive of JPMorgan Chase, Michael J. Cavanagh
announced on Tuesday that he would resign as JPMorgan’s co-leader of
investment banking to take on the role of co-chief operating officer of
the Carlyle Group, Jessica Silver-Greenberg and Michael Corkery write in DealBook.
The decision underscores how running a large bank has become less
attractive amid the heightened scrutiny and regulatory hurdles that have
beleaguered Wall Street since the financial crisis.
“While it is not uncommon for bank executives
to leave for other jobs — at least 10 senior executives have left
JPMorgan in the last two years — Mr. Cavanagh’s departure was surprising,
in part, because of his prominence at JPMorgan and his reputation
within the bank as what one executive referred to as a ‘lifer,’” Ms.
Silver-Greenberg and Mr. Corkery write. “His move also shows that the siren call of private equity and hedge funds, financial industries that promise eye-popping compensation with far lighter regulatory burdens, is growing louder.”
News of Mr. Cavanagh’s decision set off speculation
about who would ultimately succeed Mr. Dimon, as industry analysts
increasingly worry that the lure of private equity firms and other
players could siphon some of the most capable executives away from
overseeing banks.
CANDY CRUSH MAKER SET TO TRADE |
When King Digital Entertainment, the maker of the wildly popular game
Candy Crush Saga begins trading on the New York Stock Exchange on
Wednesday, investors will have to decide whether they are convinced that
King is more than a one-trick pony, Michael J. de la Merced and Mark Scott write in DealBook.
King priced its offering at $22.50 a share on Tuesday, the midpoint of
its projected range. At that price, the company will raise $500 million,
valuing it at more than $7 billion in one of the biggest initial public
offerings so far this year.
King’s offering success will depend largely on whether investors believe the company can come up with new hits
— and continued revenue and profit — to back up such a large valuation.
While Candy Crush has generated hefty earnings for King, its gross
bookings — a nonstandard measure of how much users pay for virtual items
and other goodies — fell in the fourth quarter last year. Most of all,
King is hoping to avoid the fate of Zynga, the company behind the
FarmVille and Words With Friends franchises, which made a splashy
market debut in 2011, only to see its shares plummet as it struggled to
stay relevant.
ON THE AGENDA | The Mortgage Bankers’ Association purchase applications index is out at 7 a.m. Durable goods order for February are out at 8:30 a.m. Riccardo Zacconi, a founder and chief executive of King Digital Entertainment, is on Bloomberg TV at 10:30 a.m. Andy Dunn, a co-founder of Bonobos, is on Bloomberg TV at 4 p.m. Laurence D. Fink, the chief executive of BlackRock, is on Fox Business Network at 9 a.m. Charles I. Plosser, president of the Philadelphia Fed, is on Fox Business Network at 10 a.m. Carl C. Icahn is on CNBC at 12:30 p.m. King Digital Entertainment arrives on the public markets.
MURDOCHS TAKE STEP IN SUCCESSION PLANNING | Rupert Murdoch has taken a big step in making succession plans for his media empire, appointing his sons Lachlan and James to top roles.
Lachlan will become nonexecutive chairman of News Corporation and 21st
Century Fox, while James will become co-chief operating officer of 21st
Century Fox.
