Bloomberg News

Microsoft Said to Plan to Keep Facebook Stake as Lockup Ends

August 11, 2012

Microsoft Said to Plan to Keep Facebook Stake

Facebook Inc. disappointed investors last week when it reported sales growth of 32 percent, down from 45 percent in the first quarter, and refrained from providing a sales or profit outlook for the year. Photographer: Scott Eells/Bloomberg

Microsoft Corp. (MSFT:US) will probably hang on to its stock in social-network operator Facebook Inc. (FB:US) after a ban on share sales expires next week, a person with knowledge of the company’s plans said.

Microsoft, the largest software maker, views the stake as a strategic investment reflecting the pair’s aim to combat Google Inc. (GOOG:US), rather than as a near-term moneymaker, said the person, who requested anonymity because the plans are private. Microsoft held 26.2 million Facebook shares, or 1.7 percent, after the initial public offering, regulatory filings show. The stake is worth $571.9 million.

Some of Facebook’s biggest investors, including Microsoft and Goldman Sachs Group Inc., get the chance to start selling shares on Aug. 16, after a ban on sales lifts. The stock has lost 43 percent since the May 17 IPO, and the prospect of further sales has weighed on the share price. Facebook Chief Financial Officer David Ebersman was meeting with investors in New York yesterday, a person familiar with the matter said, as the lockup expiration approaches.

“He needs to get out there and tell the story of how he’ll drive revenue growth,” Victor Anthony, an analyst at Topeka Capital Markets, said in an interview.

Facebook climbed 3.8 percent to $21.81 at yesterday’s close in New York, while Microsoft retreated less than 1 percent to $30.42.

Growth Slowed

Facebook results last month showed that second-quarter sales growth slowed to 32 percent from 45 percent in the first quarter. That was the slowest growth on record for the company.

Even before the IPO, concerns over growth began building. Facebook said in May that sales growth wasn’t keeping pace with gains in users on mobile. The company didn’t roll out its first mobile-advertising service until March.

Mark Zuckerberg, Facebook’s chief executive officer, is taking steps to make more money from mobile ads. During the call with analysts when the company announced second-quarter results, he said mobile is a key area of focus for the company. Mobile users, who make up more than half of the membership, are more active than counterparts who use only the desktop version.

“Mobile is a huge opportunity for Facebook,” Zuckerberg said.

Microsoft paid $240 million for its stake in 2007 in an investment that valued Facebook at $15 billion. The two companies are collaborating on features that integrate social information from Facebook into Microsoft’s Bing Web-search service, a rival of Google’s market-dominating product.

Tony Imperati, a spokesman for Redmond, Washington-based Microsoft declined to comment, as did Ashley Zandy, a spokeswoman for Menlo Park, California-based Facebook.

Ebersman’s meetings were previously reported by CNBC.

-- Editors: Reed Stevenson, Stephen West

To contact the reporters on this story: Dina Bass in Seattle at dbass2@bloomberg.net; Brian Womack in San Francisco at bwomack1@bloomberg.net

To contact the editor responsible for this story: Tom Giles at tgiles5@bloomberg.net


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Companies Mentioned

  • MSFT
    (Microsoft Corp)
    • $45.9 USD
    • -0.46
    • -1.0%
  • FB
    (Facebook Inc)
    • $76.55 USD
    • -2.49
    • -3.25%
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