Microsoft's $500 million offer for 5 percent stake in Facebook makes good business sense: Analysts
Software giant Microsoft is reportedly in talks to buy a 5 percent stake in Facebook for $300 million to $500 million – a deal which, if successful, would value the 3-year old Palo Alto, California-based social networking website at about $10 billion, but, adds analysts, makes good business sense.
According to sources close to the development, Microsoft is willing to buy a stake in Facebook at a premium in order to halt the march of Internet search giant Google Inc's. expansion into social networking sites.
Facebook has grown at a phemonenal rate ever since it was launched three years ago, originally for college students, and has been drawing at least 200,000 new users every day, attracting advertisers that want to target users of a particular age or gender.
According to a report by the Wall Street Journal, talks between Microsoft and Facebook are still preliminary and rival Google has also expressed interest. Facebook had rejected a $900 million buyout offer from Yahoo! last year, expressing its desire to remain independent. Following its rejection, Yahoo! is now testing a new social service called "Mash" and recently struck a deal to deliver ads in England and Ireland to the social network Bebo.
The present investment discussions by Facebook are part of its effort to help expand its current payroll of roughly 300 employees and finance other parts of its ambitious expansion plans.
According to people close to the development, a handful of financial players including venture capitalists, hedge funds and private equity firms are also in the race to pick up a stake.
Representatives from Facebook, Microsoft and Google all declined to comment on the present talks.
Market analysts claim that Microsoft's premium offer price makes Facebook more valuable than the venerable Wall Street Journal (WSJ) for which media mogul Rupert Murdoch has offered $5 billion.
The WSJ with daily US sales of 1.7 million, is second to USA Today in circulation, and has won 33 Pulitzer Prizes, fourth behind the New York Times, Washington Post and Los Angeles Times.
The newspaper's website has 931,000 loyal online subscribers and the number is growing every minute.
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