Facebook's Virtual Reality Buy Turns Off Investors: StockTwits

NEW YORK (TheStreet) -- Facebook's (FB) Mark Zuckerberg is planning for a future that looks a lot like the movie Minority Report. Investors on StockTwits.com aren't thrilled with the company's leap into science fiction.

The social networking giant announced late Tuesday that it will acquire virtual-reality headset maker Oculus VR for $2 billion. In a conference call discussing the mostly stock deal, Zuckerberg described the purchase as a "long term bet on the future of computing."

(FB) Regardless, Zuck already said the acquisition is a long-term investment. As of now, it is nothing...

-- Thanh N (@ThanhVII) Mar. 26 at 09:17 AM

Oculus is currently focused on games. But Zuckerberg sees a future where virtual reality devices are the way people interact with the Internet. Instead of mobile devices buzzing in pockets, people will have wearable virtual reality technology, perhaps embedded in fashionable eyeglasses like Google's (GOOG) coming product Google Glass.

Facebook shares opened in the red Wednesday morning and fell 1.7% by 10:30 a.m. Eventually Facebook shares were down 6.9% at close. Ouch.

Investors worried that the purchase, for $400 million in cash and 23.1 Million shares of Facebook valued at $1.6 billion, was far overvalued -- especially given that it's unlikely to make money for Facebook in the short term.

(FB) Anybody remember the Facebook phone? Oculus Rift will be another similar fail for Facebook. Working in a wrong direction

-- Sergey (@vermut) Mar. 26 at 09:29 AM

When the market go to bust cycle (FB) and (YHOO) will wish they had not wasted so much $ and (AAPL) will be sitting pretty.

-- Clinton (@ClintonSPX) Mar. 26 at 09:20 AM

"The bear camp believes that the recent multi-billion dollar acquisitions in the industry indicate that we have jumped the shark, indicating a mini bubble in valuation," wrote SunTrust's Robert Peck in a note to investors Wednesday.

Some cashtaggers compared Facebook's Oculus purchase to Yahoo!'s (YHOO) acquisition of Broadcast.com, which made Mark Cuban rich but never moved Yahoo!'s bottom line.

Don't feel bad (YHOO) paid Marc Cuban $6B for Broadcast.com & $3.50B for Geocities in 1999. Both are long gone (FB) Easy come, easy go $'s

-- SteveZ1 (@Stevez1) Mar. 26 at 09:45 AM

Zuckerberg doesn't seem focused on Oculus's revenue in the near term. He is looking to a future where people will shop online and feel as though they are walking through a store, thanks to their VR headset. They will watch sporting events, like March Madness basketball, and feel as though they are courtside. And, perhaps most importantly to Facebook, they will communicate with their social network using headsets to share experiences with their friends as though they were right in front of them.

The ads, presumably, will be somewhere right in front of them too.

But that's someday, likely a long time in the future. Facebook plans to leave Oculus alone to concentrate on gaming and growing uses for its technology. Oculus has 75,000 development kit orders from companies that want to create games that would run on its headsets. In the press release, Zuckerberg admits that applications for virtual reality beyond games are "in their nascent stages."

When it comes to making money, Facebook is zeroed in on mobile. In the conference call, Zuckerberg said that mobile has replaced the computer as the primary way people interact with the Web. It's the mobile phone that propels communication, whether it be by email, text message, tweet, phone call or video conference.

Hence Facebook's February acquisition of the WhatsApp mobile messaging service for $19 billion. With the WhatsApp acquisition and Facebook's own progress on mobile, Zuckerberg says the company is well positioned enough in the mobile arena to look to tomorrow's computing platforms. He noted that a billion people regularly use Facebook's mobile apps. 20% of time on mobile apps is spent interacting with Facebook services.

Mobile is Facebook's current cash cow. About 53% of the $2.34 billion Facebook made from advertising in the last three months of 2013 came from mobile. But some investors believe that Facebook's Zuckerberg just might be a visionary. And the future he sees could be worth the $2 billion bet.

(FB) Oculus deal suggests a world of devices beyond the Samsung (SSNLF) / (AAPL) Oligarchy.

-- Jeff McDowell, CMT (@Synaptric) Mar. 26 at 09:54 AM

Sentiment on the stock was still 75% bullish, according to StockTwits analytics.

(FB) These are the same people that didn't understand when (GOOG) bought YouTube. If it drops I average down.

-- ShootyMcStabbyface (@ShootyMcStabbyface) Mar. 26 at 09:29 AM

Only time -- perhaps as long as a decade -- will tell.

At the time of publication, the author held no positions in any of the stocks mentioned.

This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

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