Microsoft eyes Facebook stake
2007-09-25 07:05
San Francisco - Setting the stage for a possible bidding battle, Microsoft is considering an investment in social networking site Facebook that would value the rapidly growing online hangout at $10bn or more, according to a report published on Monday.
Citing unnamed people familiar with the matter, The Wall Street Journal said Microsoft is holding preliminary discussions that could culminate in a $300m to $500m investment in Facebook, which was founded just over three years ago.
In exchange, Microsoft would receive up to a 5% stake in privately held Facebook, which has previously raised nearly $41m from venture capitalists and other individual investors.
Facebook declined to comment on the reported discussions as did Microsoft, which branded the report as "rumour and speculation".
With about 42 million active users, Facebook now ranks as the web's second most trafficked social network behind News Corp's MySpace.com.
Google factor
An outright sale of Facebook is considered unlikely. Mark Zuckerberg, Facebook's 23-year-old co-founder and chief executive, has repeatedly expressed his desire to remain independent. He rejected a $1bn acquisition offer from Yahoo last year.
Facebook also has been exploring whether to raise more money from venture capitalists to help expand its current payroll of roughly 300 employees and finance other parts of its ambitious expansion plans.
With more than $100m in annual revenue, Facebook is believed to be a prime candidate for an initial public offering of stock next year or in 2009.
If Facebook's talks with Microsoft heat up, it could draw online search leader Google to the negotiating table, too.
"Google would love to keep it out of the hands of Microsoft or at least drive up the price," said Forrester Research analyst Josh Bernoff.
Own computing platform
Two years ago, Microsoft and Google competed against each other to buy a 5% stake in Time Warner's AOL, with Google ultimately prevailing by agreeing to pour $1bn into the company as part of a wide-ranging advertising partnership.
Microsoft already is delivering online ads to Facebook in the United States as part of an agreement that expires in 2011. Citing unnamed sources, the Journal also reported Microsoft and Facebook are considering extending the current contract and expanding the advertising to other parts of the world.
Facebook has broadened its appeal during the past year by allowing people of all ages to set up personal profiles on the site and making it easier for other internet companies to run their applications on its users' pages.
By building its own computing platform, Facebook has emerged as more of a threat to Microsoft, Bernoff said. Investing in Facebook is one way for Microsoft to hedge its bets, he added.
- AP
- AP