Stock Pick by Salvatore Esposito

MSFT: MS buys stake in Facebook

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3 ratings

Posted 758 days ago on 10/25/07

Market call:MSFT will go UP
Target: $35.00 on 1/25/08
Current: $29.62 (-6.83% from time of market call)

The New York Times is reporting that Microsoft has beat out Google and Yahoo for a 1.6% stake in Facebook. The investment will cost Microsoft $240 million valuing the total site at somewhere around $15 billion. "The astronomical valuation for Facebook is primarily evidence that Microsoft executives believed they could not afford to lose out on the Facebook deal. Google appears to be building a dominant position in the race to serve advertisements online. Fearing it might lose control over the next generation of computer users, Microsoft has been attempting to match and in some cases block Google's plans, even if that effort is costly." On top of this they signed an exclusive deal to manage all advertising on Facebook and that's a good move.

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Salvatore Esposito

Posted 10/26/2007, 4:24 am

"Microsoft's $240 million investment is much smaller than the rumored $750 million that Facebook sought. Why the difference? Wired Epicenter's Terrence Russell analyzes the deal, and points out three good reasons why Microsoft got a 'bargain'. 'Microsoft Only Needs an Entrenched Position - Ballmer's plan to acquire 100 startups in 5 years is still sketchy, but we got the point -- Microsoft wants momentum. If the company is to go forward as planned then taking a small, strategic piece of Facebook makes sense. Microsoft's financial interests in Facebook's ad platform already exist, so it only makes sense to strengthen that tie as the hype builds.'"

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