Microsoft eyes Facebook stake

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The battle over Facebook continues.

Software giant Microsoft is reportedly in talks to buy a minority stake in popular social networking site Facebook.

According to a report in yesterday's Wall Street Journal, the firm recently approached Facebook with proposals to invest in a stake of up to 5% stake in the website.

Citing sources close to the matter, the newspaper said Microsoft was prepared to pay from $300 million to $500 million for the stake, an offer that would elevate the value of the US-based Facebook to a staggering $10 billion.

The software giant is not the only firm wanting to get its hands on Facebook, however.

Internet search giant Google is also rumoured to be interested in taking a piece of the social networking site, while Yahoo last year reportedly tried to buy the US-based company for $1 billion.

For Microsoft, which is aiming to build up its online business, investing in Facebook would be a logical step, opines IDC senior software analyst Vinay Nair.

"The Facebook platform runs on Microsoft's advertising platform so it is definitely an area of interest for Microsoft, especially when it tries to think of new ways to compete in the space with the likes of Google," he said.

Tightening its ties with Facebook would also enable Microsoft to get closer to a new generation of programmers, he adds.

"Facebook is for the most part a very young audience and they see it as a next generation platform to reach out to the new programmers out there," he said.

This is not the first time that Microsoft, which has so far refused to comment on the rumours, has shown interest in Facebook, the second largest social network site after MySpace. The software giant was reported to have considered a possible takeover of Facebook earlier this year.

Founded in February 2004, Facebook is one of the world's most popular social networking sites with around 42 million active users. It is also one of the fastest growing having more than doubled in size over the past 12 months.

The site, which allows users to create profiles, generates its income from revenue advertising. It is estimated to have made anywhere between $150 million and $300 million in advertising so far this year.

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