META - Meta eyes return to China with Tencent deal to sell VR headsets

2023-11-10 03:33:09 ET

Meta Platforms ( NASDAQ: META ) has inked a preliminary deal with Tencent ( OTCPK:TCEHY ) to sell a lower-priced version of its virtual-reality headset Quest in China, The Wall Street Journal reported, 14 years after Facebook was banned in the country.

The deal would make the Chinese multimedia conglomerate the exclusive seller of Meta's ( META ) headsets in China, the report said, citing people familiar with the matter. Tencent ( OTCPK:TCEHY ) will start selling the headsets late next year, although the price is not known.

Meta ( META ) would earn a bigger share of the headset sales, while Tencent ( OTCPK:TCEHY ) would get more of the content and service revenue as its games and others apps will be available in the cheaper device.

The deal marks Meta's ( META ) return to China after Beijing blocked Facebook and Twitter in 2009 for allegedly abetting the Xinjiang riots.

The Tencent ( OTCPK:TCEHY ) deal would allow Meta ( META ) to compete with TikTok-owner Bytedance ( BDNCE ), which makes the VR headset Pico.

To note, Pico is buckling under weakening demand and laying off "hundreds" of employees as part of a major rehaul to slash costs, Reuters reported .

Pico CEO Zhou Hongwei said the company's "estimation for the VR industry and market growth was too optimistic as (real growth) did not go as fast as expected."

Meta ( META ) has also been facing muted demand for its VR headsets, with the company likely expecting shipments to "decline significantly" in Q1 2024 .

More on Meta's Quest headsets

• Meta's Wildcard: Reality Labs
• Meta likely cut Quest 3 shipments forecast
• Meta Platforms Stock: A Bargain No More
• Meta's Quest 3 demand continues to weaken
• Meta shows off Quest 3 headset, AI updates

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