Microsoft is in talks to buy up to 5% of Facebook in a deal that could value the online social networking site at $US10 billion or more.
The Wall Street Journal has reported that Microsoft sought to buy the stake in Facebook, founded by 23-year-old chief executive Mark Zuckerberg, for between $US300 million to $US500 million.
Facebook is reported to be insisting on a valuation as high as $US15 billion, and is considering raising $US500 million in cash to expand operations.
The deal would give Microsoft access to younger users and help it better compete against Google for online advertising dollars. Microsoft could help Facebook develop software for use around the site.
Representatives of both companies have declined to comment.
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