Microsoft plans to keep Facebook stake as lock-up ends

Microsoft Corp will probably hang on to its stock in social-network operator Facebook Inc 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), 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 per cent, 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 August 16, after a ban on sales lifts. The stock has lost 43 per cent 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 per cent to $21.81 at yesterday’s close in New York, while Microsoft retreated less than 1 percent to $30.42.

Facebook results last month showed that second-quarter sales growth slowed to 32 per cent from 45 per cent 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.