Microsoft Bankers Made Advances to Facebook, WSJ Says (Update3)
By Amy Thomson
May 7 (Bloomberg) -- Microsoft Corp.'s bankers approached Facebook Inc. about taking over the social-networking site, an attempt to build on its $240 million investment last year, the Wall Street Journal reported.
The companies aren't in active discussions now, the newspaper said today, citing a person familiar with the talks. Microsoft has expressed interest in purchasing the closely held company several times in the past three years, the Journal said.
Microsoft is weighing options to shore up its money-losing Internet business after its failed bid for Yahoo! Inc. Microsoft bought a 1.6 percent stake last year in Facebook, the owner of the second most popular social-networking Web site. The investment valued the company at about $15 billion.
``It all depends on the price that Microsoft is going to pay for Facebook,'' said Toan Tran, a Morningstar Inc. analyst in Chicago, calling $15 billion a ``risky'' price. ``You can make an argument that Facebook might be worth that, but you're betting a lot on Facebook's future growth and what social networking would become.''
An acquisition would help Microsoft, the world's biggest software maker, tap the surge of visitors and advertisers on social-networking Web sites. The earlier investment increases the chance of a deal, said Tran, who doesn't own Microsoft shares.
Frank Shaw, a spokesman for Redmond, Washington-based Microsoft, declined to comment. Facebook representatives didn't immediately return messages seeking comment.
`Early Stages'
With the investment in October, Microsoft also made an agreement to sell ads for the social-networking site overseas, beating out a bid from Google Inc. Microsoft already had a deal to sell Facebook banner ads in the U.S. through 2011.
``Right now monetizing social networking is still in its early stages,'' said Andy Miedler, an analyst at Edward Jones & Co. in St. Louis. He has a hold rating on Microsoft shares, which he doesn't own. ``Given the huge audience size, there's likely to be significant Internet advertising associated with social networking going forward.''
Microsoft dropped 49 cents to $29.21 in Nasdaq Stock Market trading at 4 p.m. New York time. The shares have declined 18 percent this year. Yahoo, up 10 percent this year, fell 8 cents to $25.64.
Gaining Ground
Microsoft has said Facebook could reach 200 million to 300 million users. The site is closing in on News Corp.'s MySpace, the market leader, in social-networking customers.
MySpace had an audience of 107.7 million users as of February, little changed since March 2007, according to Reston, Virginia-based ComScore Inc. Facebook tripled to 100.3 million over that period. News Corp. acquired MySpace in 2005.
Facebook, started by 23-year-old CEO Mark Zuckerberg in 2004, grew out of a college dorm-room project. Teenagers and young adults flocked to Facebook after the site expanded beyond university students in 2006, attracting advertisers that want to target users of a particular age or gender.
Zuckerberg said last year that the Palo Alto, California- based company has no plans to go public.
Microsoft Chairman Bill Gates said his company will pursue an ``independent strategy'' after Yahoo rejected its $47.5 billion takeover bid this month.
Microsoft is likely looking at investments in a wide range of companies, including Facebook, to beef up its Internet advertising business, which lost $228 million last quarter, Miedler said.
``We put a lot of effort in talking with Yahoo and the conclusion was reached that we should pursue our independent paths,'' Gates said today at a press conference in Tokyo.
To contact the reporter on this story: Amy Thomson in New York at athomson6@bloomberg.net
Last Updated: May 7, 2008 16:05 EDT |
