Whitefish, MT / August 21, 2014 / When Facebook (NASDAQ: FB) agreed to pay $2 billion to acquire Oculus VR in March, a deal that closed last month, the tech and investment world was set abuzz about whether or not the purchase made any sense. At first, sentiment seemed to lean towards the idea that the social media giant was out of its mind. The needle seems to be shifting now, though, to the side of it being a prescient move that is aligning Facebook to be ahead of the curve in developing its own platform for the next generation of communication and interaction.
People may have seen the acquisition of Oculus in a different light if Google (NASDAQ: GOOGL), Microsoft (NASDAQ: MSFT) or even Apple (NASDAQ: AAPL) made the purchase as a bolt-on to expand current platforms. But a social network buying a virtual reality (VR) gaming device? That was hard for many to wrap their brains around until it became more apparent that Facebook has a vision here that doesn’t have the extended time frame to market that most may have first thought.
Facebook CEO Mark Zuckerberg sees the Oculus VR platform expanding far past games into a litany of other experiences, such as sporting events, education and doctor visits. “This is really a new communication platform. By feeling truly present, you can share unbounded spaces and experiences with the people in your life. Imagine sharing not just moments with your friends online, but entire experiences and adventures,” Zuckerberg said when the acquisition was announced.
Those old enough remember how the Internet changed the world. In more recent years, the shift to using mobile devices has been so strong, that Facebook’s ability to transition from desktop to mobile was in serious question and drove the share price from $45 on IPO day in May 2012 down to around $18 shortly after. Of course, Facebook has answered the call, with the stock printing a record high of $76.74 a few weeks ago after crushing analyst expectations on profits ($0.42 per share versus forecasts of $0.32 per share), while showing monthly active mobile users climbed to 1.07 billion from 1.01 billion in the previous quarter.
Just like the web itself and then mobile, VR looks to be the next paradigm-shifting technology and odds are, it’s going to be much bigger than the switch to mobile. Facebook seems to think so. In the recent earnings call, Zuckerberg reiterated that the company intends to “invest heavily” in building out its VR technologies in the coming years. He added, “There are huge opportunities to build the next generation of computing platforms.”
According to a recent report released by MarketandMarkets the VR market is expected to reach $1.06 billion by 2018. With new opportunities growing for the VR market, below are companies in the VR space that are set to rise with the growth of Virtual Reality (VR) Headsets.
Next Galaxy Corporation
Next Galaxy Corporation (OTCQB: NXGA) is a virtual reality company founded by former Boeing (NYSE: BA) digital engineering guru Mary Spio. The company’s technology platform in development is called CEEK (pronounced “seek”). Headsets are one thing, but they are nothing without content, which is where the Next Galaxy is focused. As VR productions become mainstream, content represents the area that will likely experience a veritable revenue explosion. CEEK is designed to be an entertainment hub that simulates the communal experience of attending live and virtual events, such as concerts, travel, sporting events or business conferences, through Virtual and Augmented Reality.
To bring this product to consumers, the company has recently teamed up with EON Reality to create the first fully immersive and interactive social virtual reality platform using the Oculus Rift headset. On the content front, they have brought on renowned producer Willie “Bum Bum” Baker to create a series of virtual reality shows with the CEEK platform. The collaboration will be a “docu series” that will be shot with 360-degree cameras to give fans an inside look at today’s music stars as well as up-and-coming artists. Baker, a Grammy-nominated producer with a long list of accolades, has worked with the likes of Beyonce, Pink, India Arie and BoyzIIMen.
Moving forward with its conferencing initiatives, Next Galaxy added former Canadian Trade Commissioner Sandra Peart to its Advisory Board this month. Currently a Senior Product Quality Manager at GoToMeeting owner Citrix Systems (NASDAQ: CTXS), Ms. Peart’s experience and relationships are significant value adds in developing CEEK’s virtual reality meeting rooms.
Glu Mobile Inc. (NASDAQ: GLUU) is another gaming company that looks to take advantage of this new technology. They have been highlighted recently with their successful game, Kim Kardashian: Hollywood that is projected to earn $200 million in its first year. The company has been leading the gaming industry with 3D technology and game integration for several years. Analysts anticipate that the Kardashian game will generate $200 million in revenues in its first year. While this title is still hot, Glu is releasing its next big game, Tap Sports Baseball. There is a high level of social media integration with this new release as users will create teams and play against friends on Facebook. With the initial release date of August 14, downloads have been strong and the initial reviews by users are positive.
Gaming with Facebook positions the company to utilize Oculus Rift in its gaming strategy when it is released to the public next year. Recently, Glu has experienced a recent decline in stock price due to the announcement that it is buying Cie Games. This purchase should be complete by the end of August. While the initial response was hesitant due to the price paid, the purchase is expected to strengthen the balance sheet. With the purchase of Cie and the success of Kardashian: Hollywood, the expectation is that third quarter earnings will outpace analysts’ predictions, providing a needed rebound in the stock price.
Companies like Himax (NASDAQ: HIMX) are strategically positioned to ride the coattails of Facebook as Oculus Rift is released. Himax produces the LCD timing controller in Oculus Rift. This integral piece tracks motion so well that it produces a fully integrated experience for the user. VR has been around for years, but the technology available has always created negative effects for the user. This was a result of delays in processing from what the eye sees and the computers response. Himax has improved this technology so perfectly that the user feels as if they are in the scene creating a true virtual experience that mimics reality.
Himax stock price has ranged from $5.57 to $16.15 over the last 52 weeks. They have seen an increase in volume and stock price in August following their second quarter earnings report that showed profits improved 27% over the last quarter, with expectations for the trend to continue. Analysts are giving the stock a buy rating due to strong earnings per share and strong net income growth. The company is also contributing technology to Google Glass, another technology that can provide explosive growth in the coming quarters.
The breath of usage for virtual reality products extends well beyond games and social interactions. VR is expected to penetrate nearly every field. This includes medical uses with doctor patient interactions that can engage people from around the world in a VR setting. Then there is 3D technology that can utilize VR for things like facial recognition and security.
NXT-ID (OTC: NXTD) has biometric technology that is currently being used in the security industry. Their technology is used with law enforcement and even mobile security for our smartphones and tablets. This technology has the ability to combine 3D and virtual reality technology to create products that will provide higher levels of security. With their Wocket product, which is a virtual wallet, in the testing phase, we may see this bridge in technology sooner than later.
Virtual reality is at the crest of being a major factor in new innovations and technological advances. The uses seem endless as we see innovative companies embrace the possibilities.
It has just been a matter of time before the trifecta of the collision of communications, real world experiences and virtual reality happened. About 1.5 billion people use social media every day around the world. They idea of keyboard strokes and flat web pages will soon be a thing of the past; replaced by rich exchanges between digital representations of people and places. The gaming industry is the obvious for virtual reality headwear, but the implications of future uses by companies like Facebook, Next Galaxy, Glu Mobile, Himax and NXT-ID are defining the true breadth and reach of VR that can change, well, virtually everything.
Except for the historical information presented herein, matters discussed in this release contain forward-looking statements that are subject to certain risks and uncertainties that could cause actual results to differ materially from any future results, performance or achievements expressed or implied by such statements. Emerging Growth LLC is not registered with any financial or securities regulatory authority, and does not provide nor claims to provide investment advice or recommendations to readers of this release. Emerging Growth LLC may from time to time have a position in the securities mentioned herein and may increase or decrease such positions without notice. For making specific investment decisions, readers should seek their own advice. Emerging Growth LLC may be compensated for its services in the form of cash-based compensation or equity securities in the companies it writes about, or a combination of the two. For full disclosure please visit: http://secfilings.com/Disclaimer.aspx
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