(Agencies)
Updated: 2007-09-25 22:06

SAN FRANCISCO - Setting the stage for a possible bidding battle, Microsoft Corp. is mulling an investment in Facebook Inc. that would value the rapidly growing online hangout at $10 billion or more, according to a report published Monday.

Citing unnamed people familiar with the matter, The Wall Street Journal said Microsoft is holding preliminary discussions that could culminate in a $300 million to $500 million in Facebook, a Palo Alto social-networking site founded just 3 1/2 years ago.

In exchange for the money, Redmond, Wash.-based Microsoft would receive up to a 5 percent stake in privately held Facebook, which has previously raised nearly $41 million from venture capitalists and other individual investors.

Facebook declined to comment on the reported discussions as did Microsoft, which branded the report as "rumor and speculation."

An outright sale of Facebook is considered unlikely. Mark Zuckerberg, Facebook's 23-year-old co-founder and chief executive, has repeatedly expressed his desire to remain independent. He rejected a $1 billion acquisition offer from Yahoo Inc. last year.

Facebook also has been exploring whether to raise more money from venture capitalists to help expand its current payroll of roughly 300 employees and finance other parts of its ambitious expansion plans.

With more than $100 million in annual revenue, Facebook is believed to be a prime candidate for an initial public offering of stock next year or in 2009.

If Facebook's talks with Microsoft heat up, it could draw online search leader Google Inc. to the negotiating table, too.

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