Microsoft is in negotiations to buy a minority stake in social networking site Facebook Inc., according to the WSJ. Microsoft's proposals are said to value Facebook at about $10 billion. Unnamed sources say Microsoft is interested in purchasing up to 5% of the company at a cost of $300-500 million. Microsoft might end up going head-to-head with Google for Facebook, which brushed aside a $1 billion offer from Yahoo last year. Facebook, which might hold out for a valuation of up to $15 billion, is believed by industry observers to be a prime candidate for an IPO in 2008 or 2009. In related news, Microsoft is giving oversight of its online ad business to ad executive Brian McAndrews, whom Microsoft acquired when it bought aQuantive last month for $6 billion. Microsoft, Google, Yahoo and others are competing to construct a "platform" -- a single location at which advertisers can buy ads that appear all over the Internet. Google is well ahead of Microsoft, with an estimated one million advertisers buying ads on its system. Google pulled in $3.9 billion in revenue in Q2, almost all from online ads, against $688 million reported by Microsoft's online group. Microsoft is working with a p.r. firm to combat Google's $3.1 billion acquisition of online ad broker Doubleclick.
Sources: Wall Street Journal, MarketWatch, C|Net News.com, AP, New York Times, TheStreet.com [video], 24/7 Wall Street, Financial Times
Commentary: Microsoft/Facebook Rumors Persist • Will Microsoft Turn Its Sights On Facebook? • Microsoft Hires PR Firm to Battle Google-Doubleclick Merger - WSJ
* Stocks/ETFs to watch: MSFT. Competitors: GOOG, YHOO.
Earnings call transcript: Microsoft F4Q07
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