Microsoft grabs stake in Facebook

Rapidly rising internet star Facebook Inc. has sold a 1.6-per-cent stake to Microsoft Corp. for $240 million U.S., spurning a competing offer from online search leader Google Inc.

The deal announced Wednesday after several weeks of negotiation values Palo Alto, Calif.-based Facebook at $15 billion US less than four years after Mark Zuckerberg started the online social networking site in his Harvard University dorm room.

Microsoft also will sell internet ads for Facebook as the site expands outside the United States, broadening an existing marketing relationship that began last year.

Besides validating Zuckerberg's decision to rebuff a $1-billion takeover offer from Yahoo Inc. last year, Microsoft's money should be more than enough to pay for Facebook's ambitious expansion plans until the privately held company goes public.

Zuckerberg, 23, has indicated he would like to hold off on an initial public offering for at least two more years. In the meantime, Facebook hopes to become an advertising magnet by substantially increasing its current audience of nearly 50 million active users.

The Facebook investment represents a coup for Microsoft because it provides the world's largest software maker with a toehold on one of the internet's hottest platforms and a potentially lucrative forum for selling online ads.