Will MSFT push Yahoo to buy Facebook?

According to the Wall Street Journal, the software behemoth known as the Beast from Redmond is looking at buying between three and five per cent of Facebook for between $300-million and $500-million. As any math whiz (of which I am not one) could tell you, that would value the company at about $10-billion, which would make Facebook backer Peter Thiel’s wish come true.

I know that there have been plenty of rumours out there about Facebook and Yahoo, Facebook and Google, Facebook and my Aunt Sally — you name it. But while the Journal may be getting a little scrappier now that it’s owned by Rupert “Get in here so I can fire you” Murdoch, it’s still the Journal and so it has to be taken seriously.

Although the WSJ talks about this sparking Google to pony up for Facebook, however, I think the more interesting question is whether it will light a fire under the new regime over at Yahoo. Presumably they got rid of Terry Semel so that they could actually get off their duffs and do something about that “peanut butter” memo and all of the valid criticisms it contained.

Making a big bet on social networking could be just the thing it needs to fire a shot across Microsoft and Google’s bows. And my friend Paul Kedrosky thinks Yahoo is a likely bidder too.


I realize — as Joe Duck points out in the comments below — that $10-billion is almost a third of Yahoo’s market capitalization. As 24/7 Wall Street puts it, that’s because “Facebook is growing and Yahoo! is not.” That doesn’t put it out of Yahoo’s reach, however, thanks to the magic of stock-and-debt offerings. Whether it would be wise or not is a different question. Kara Swisher at All Things D has a skeptical look at whether the Facebook hype is getting a little too rich.