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Will Virtual Reality Be Next Big Thing Across Technology?

Virtual reality might soon be a reality, its backers say. While most observers greeted with skepticism Facebook's (FB) surprise announcement Tuesday that it would buy a virtual reality startup for $2.2 billion, others praised Facebook CEO Mark Zuckerberg's foresight.

True, the VR dreams of technologists, futurists and sci-fi writers remain largely unfulfilled. But progress is tantalizing.

"We are moving into a period now where we have a lot of spare processing power and smaller components that can go into making some of this virtual reality definitely feasible," Richard Yonck, analyst at consulting firm Intelligent Future in Seattle, told IBD.

Oculus VR is one example. The company Facebook has agreed to acquire for $400 million in cash, $1.5 billion in stock and up to $300 million in milestone payments has developed a well-regarded virtual reality game headset in less than two years.

But the futuristic headset — called the Oculus Rift — is not merely a game device, Zuckerberg told analysts on a conference call late Tuesday. It's nothing less than a step toward the "next major computing platform" after mobile, he said.

10-Year Cycles

That might seem like a tall tale, but technology moves in cycles of 10 years or so, says Zuckerberg. Mobile — where Facebook, in fact, was a bit late to the party — not that long ago seemed far-fetched, too, but the No. 1 social network now boasts more than 1 billion active mobile users.

Oculus' prototype echoes similar products in development, including virtual reality goggles from Sony (SNE) and Microsoft (MSFT), as well as the augmented reality Google (GOOG) Glass eyewear.

Facebook execs say the Oculus Rift will be used for social interactions and communication, besides gaming.

Just last week, Oculus introduced a development kit for software makers, and already some 75,000 developers have signed up, paying $350 each.

If VR is indeed the next major computing platform, "we believe the Oculus acquisition will allow Facebook to shape and benefit from the evolution of virtual reality into mainstream communication and media," wrote JPMorgan analyst Doug Anmuth in a research note.

Oculus is an "investment in the post-mobile world," UBS analyst Eric Sheridan wrote in a research note. "That said, Facebook believes it can justify the cost of the acquisition on the gaming opportunity alone.

Researchers for years have been studying ways to apply virtual reality outside of gaming, says Michal Ann Strahilevitz, a professor at San Francisco's Golden Gate University. The education field is one example.

"Imagine feeling like you are in the classroom with other students, even though you are sitting at home alone," Strahilevitz said via email.

The prototype Oculus Rift looks like a pair of goggles that completely cover a user's eyes. The Rift uses stereoscopic technology, so that when users turn their head while wearing it, they get the sensation that they're looking around a virtual environment.

San Francisco games developer Linden Lab this month released beta test software for using the Rift in its longtime virtual-life game "Second Life.

"Developments like the Oculus Rift hold great potential for 'Second Life,'" Linden Lab spokesman Peter Gray told IBD.

'Creeps Me Out'

Some developers, though, lost enthusiasm for Oculus after the Facebook announcement.

Markus Persson attracted media attention by saying via Twitter that he no longer plans to build a version of his popular "Minecraft" game for Oculus because he doesn't trust Facebook.

Facebook "creeps me out," wrote Persson. But he also acknowledged that Oculus has "built the first prototype of VR that was finally just good enough to be usable, and it was only going to get better and better.

But VR remains largely an unknown, and investors sent Facebook stock falling nearly 7% on Wednesday.

Oculus and other VR makers have piggybacked on technology from smartphones, a product that's spurred parts manufacturers to make ever-smaller components, says Karl Krantz, who organizes a Meetup group of more than 500 virtual reality enthusiasts in Silicon Valley.

Krantz expects Rift will be priced to be affordable for most consumers.

"Even just a few years ago, the technology required to provide an experience equivalent to the current Oculus Rift would have cost tens of thousands of dollars," Krantz said.