Microsoft Corp. is reportedly considering investing up to $500 million in privately held Facebook Inc. to boost its Internet operations.The
Redmond, Wash., software giant is in talks with Facebook about taking a
5% stake in the social networking site for a price of between $300
million and $500 million, according to a Wall Street Journal report.
Palo Alto, Calif.-based Facebook could use the cash for acquisitions,
infrastructure investment or new hires, according to the report.
Neither company responded to requests for comment. But Microsoft could face a bidding war against archrival Google Inc., which has also expressed an interest in buying a stake in Facebook.
The talks would value Facebook at up to $10 billion, a startling sum
for a company that reportedly expects to record a profit of just $30
million on $150 million in sales this year. Microsoft, however, has
been eager to jump-start its online business to counter Google's
growing power in Internet advertising.
The two companies have battled over assets before, with Google outbidding Microsoft for a 5% stake in Time Warner Inc.'s AOL unit in 2005.
Facebook is backed by Accel Partners, Greylock Partners, Meritech Capital Partners and Peter Thiel, who is president of hedge fund Clarium Capital Management and managing partner of venture firm Founders Fund Management. Facebook held talks with Yahoo! Inc. of Sunnyvale, Calif., in the past year but backed off after being unhappy with the proposed valuation.
Meanwhile, Facebook has been looking to expand, striking a deal in
July to acquire Parakey Inc., which develops software that ties
information from a user's computer to the Web, for an undisclosed sum.
Microsoft already has a deal in place to deliver online ads to
Facebook through 2011. The report said that the two companies are also
exploring extending that contract and expanding it to handle ads
outside the U.S.
