Microsoft is talking to Facebook about an investment in the company that could value the fast-growing social network at $10 billion or more, the Wall Street Journal reported on its Web site on Monday.
Citing people familiar with the matter, the Journal said the world's largest software company sought to buy a stake of up to 5 percent in Facebook for $300 million to $500 million.
Facebook, led by its 23-year-old founder and Chief Executive Mark Zuckerberg, may insist on a valuation as high as $15 billion and is considering raising up to $500 million in cash to expand its operations, according to the Journal.
Such a deal could help Microsoft better compete against Web search leader Google for email users and a growing base of Internet advertising. Google has also expressed an interest in investing in Facebook, the Journal report said.
Facebook, which allows members to seek out a circle of friends and share online activities, has seen speculation over a potential partnership or buyout intensify as it rapidly expands its base of users and advertisers.
It has grown to 39 million members, up nearly 63 percent from 24 million in late May and is quickly gaining ground against larger rival MySpace, owned by News Corp.
Microsoft shares rose 2.5 percent to $29.36 in late trading on the Nasdaq.
Microsoft would not comment on the report, while Facebook representatives were not immediately available to comment.
New York Accuses Facebook on Sexual Predators
Also Monday, New York State Attorney General Andrew Cuomo said his office is investigating Facebook, accusing the popular social networking website of not keeping young users safe from sexual predators and not responding to user complaints.
In a letter accompanying a subpoena for documents, Cuomo said a preliminary review revealed defects in the site's safety controls and in the company's response to complaints. These shortcomings contrast with assurances made by the company.
In recent weeks, investigators conducted undercover tests of Facebook's safety controls and procedures, posing as underage users. Cuomo's investigators found they were solicited by adult sexual predators on Facebook and could access pornographic images and videos.
A spokeswoman for the privately held company declined to comment immediately but said the company was aware of the subpoena and preparing a statement.