Microsoft reportedly in talks to invest in Facebook

SEATTLE (Reuters) - Microsoft Corp is in talks to buy up to 5 percent of Facebook in a deal that could value the fast-growing online social network company at $10 billion or more, the Wall Street Journal reported on Monday.

The move could give maturing Microsoft more access to young users and let Facebook get closer to a major software maker at a time when its growth is increasingly tied to a proliferation of small applications from independent developers on its site.

Citing people familiar with the matter, the Journal said the world's largest software company sought to buy a stake of up to 5 percent in Facebook for $300 million to $500 million.

Facebook, led by its 23-year-old founder and Chief Executive Mark Zuckerberg, may insist on a valuation as high as $15 billion and is considering raising up to $500 million in cash to expand its operations, according to the Journal.

Such a deal could help Microsoft better compete against Web search leader Google Inc for a growing base of online advertising and put one of the Internet's hottest names in Microsoft's camp.

Facebook, which already has an advertising deal with Microsoft, would benefit from closer ties with developers as it seeks to turn its site into a full-fledged Web platform where users can play games, interact and read news about each other, said Forrester analyst Charlene Li.

"If you are building a business around building a platform there is one company that has done it better than anybody else -- and that is Microsoft," she said. "People have been just assuming that Google would be the best partner and that is not necessarily the case."

Google has also expressed an interest in investing in Facebook, the Journal report said.

"It would probably be pretty good for Microsoft since it has not had the best success in creating really hip, young-people-grabbing stuff on the Web," said Kim Caughey, a senior analyst at Fort Pitt Capital Group, which oversees more than $1 billion, including Microsoft shares, for clients.