Facebook in Microsoft’s sights after Yahoo! snub

Microsoft may turn its attention to Facebook after Yahoo! rejected its $44.6bn (£22.4bn) takeover bid. Microsoft bought a 1.6% stake in the social networking site for $240m (£120m) at the end of last year, valuing Facebook at $15bn (£7.6bn).

Microsoft is thought to be considering its options after being rebuffed by Yahoo!, which said its rival’s bid “substantially undervalued” the company. It could increase its offer but some experts believe it will walk away and use its money to buy other web 2.0 companies, with Facebook top of its list.

It has emerged that Rupert Murdoch has reignited talks with Yahoo after its rejection of Microsoft’s bid but analysts warn a News Corp/Yahoo! tie up could be fraught with problems.

It is believed that News Corp has floated the possibility of swapping some of its online properties, including its social networking site MySpace, for a stake of more than 20% in a newly merged business. The proposal is similar to one made by Murdoch last year, but which failed to come to fruition.

But Wall Street analysts have pointed out that while a Yahoo! and MySpace merger would be a powerful combination, it may be hampered by the fact that Google supplies MySpace’s search technology, and is bound by a four-year contract.