View Full Version : Microsoft Is in Talks To Buy Facebook Stake

September 24th, 2007, 11:53 PM
SAN FRANCISCO -- Microsoft Corp. is in talks with Facebook Inc. about making an investment in the social-networking startup that could value Facebook at $10 billion or more, according to people familiar with the matter.

The talks set up another likely face-off between tech titans: Google Inc. has also expressed strong interest in a possible Facebook investment, said people familiar with the matter.

Microsoft's approach to Facebook in recent weeks with proposals to invest in the fast-growing site is part of the software giant's effort to catch up with the Internet rival Google. If successful, Microsoft's talks with Facebook could give it an up-to-5% stake in the closely-held startup -- a stake potentially valued at roughly $300 million to $500 million, the people familiar with those talks said.

The people familiar with the matter said that the discussions are still preliminary and Facebook could wind up not taking an investment from either Microsoft or Google. Factors in the discussions include the valuation the suitors would offer to Facebook and other business considerations they could contribute to sweeten any deal.

A Facebook spokeswoman and spokesmen for Microsoft and Google declined to comment.

Facebook, which is used by over 40 million people to set up their own personal Web pages, to communicate with each other and to share photos and videos, has emerged as the poster child for the latest Internet wave. The company expects this year to have a profit of $30 million on revenue of $150 million, according to people familiar with the matter. Based on that, a $10 billion valuation for the company is sky-high. But an investment in Facebook could give Microsoft or Google greater opportunities to tie their services in with Facebook at a time when they've both recognized that social networking is changing how consumers tap into their core activities, such as Web search and email.

The Facebook approach is also part of Microsoft's urgent attempt to strengthen its ad "platform," which lets advertisers automatically place ads on Web sites and on Microsoft's Internet search engine.

Microsoft's platform strategy isn't unique: Google and Yahoo Inc. are also racing to establish their platforms as the broker of choice for hundreds of thousands of advertisers on millions of Web sites. That approach has taken on urgency as users and advertisers increasingly spend time and dollars on sites besides the big, established Web portals. Facebook itself is working on an ad platform that would let marketers target users with ads based on their personal information, using an automated Web-based system, according to people familiar with the matter.

Microsoft and Facebook may also expand an exclusive agreement signed last year under which Microsoft serves display ads to Facebook, according to a person familiar with the matter. The existing deal is expected to bring in about $75 million for Facebook this year and a total of at least $200 million to $300 million through 2011, say people familiar with the matter. The actual numbers will depend on Facebook's traffic growth and other factors, these people say. That existing agreement covers only the U.S. and expires in 2011, but the companies are discussing whether to extend it for a longer period and expand it beyond the U.S., this person said. This person said that Facebook has also discussed possible ad relationships with Google, though the existing Microsoft agreement limits the options.

Facebook, meanwhile, is considering raising as much as $500 million in cash that could be used for acquisitions, investing in computer infrastructure and adding to its roughly 300-person headcount, said the people familiar with the company.

Facebook has indicated that it might hold out for a higher valuation – as much as $15 billion – than Microsoft is willing to agree on, the people said. Such a move could attach a high value to any Facebook pre-IPO shares it would use in acquisitions, to its advantage.

Facebook is also considering raising funds from financial investors, in addition to or instead of an investment from a strategic investor like Microsoft or Google, one person said. The company has so far raised about $40.7 million from venture-capital firms including Founders Fund, Accel Partners and Greylock Partners.

Microsoft has considered trying to buy the company outright, but people familiar with the matter said it's unlikely at this time. Facebook founder Mark Zuckerberg has steadfastly kept his company independent with the goal of eventually taking the company public. In a round of negotiations last year, Mr. Zuckerberg rebuffed acquisition approaches from Microsoft, Yahoo and others.

This may actually happen, as long as Mark Zuckerberg continues to run te site then I have nothing against Microsoft moving in.

http://www.digg.com/tech_news/Microsoft_in_Talks_to_Buy_Facebook_Stake_Valuing_T he_Company_at_10_Billion

September 25th, 2007, 09:58 PM
Blah, as if the Myspace-ization wasn't bad enough. If it gets any worse, I might delete my account.

Lord Illidan
September 25th, 2007, 10:03 PM
Never used facebook, so I don't really care.