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The move could give Microsoft greater access to young users and let Facebook get closer to a major software maker, at a time when its growth is increasingly tied to a proliferation of small applications from independent developer.

The Wall Street Journal claims the world's largest software company sought to buy a stake of up to 5% in Facebook for $300-$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.

The deal could help Microsoft better compete against Google for a growing

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base of online advertising and put one of the internet's hottest names in Microsoft's camp.

Advertising deal

Facebook, which already has an advertising deal with Microsoft, would benefit from closer ties with developers as it seeks to turn its site into a fully-fledged web platform where users can play games, interact and read news about each other, says Forrester analyst Charlene Li.

"If you are building a business around building a platform there is one company that has done it better than anybody else - and that is Microsoft," she says. "People have been just assuming that Google would be the best partner and that is not necessarily the case."

Google has also expressed an interest in investing in Facebook, the Journal reports. "It would probably be pretty good for Microsoft since it has not had the best success in creating really hip, young-people-grabbing stuff on the web," says Kim Caughey, a senior analyst at Fort Pitt Capital Group, which oversees more than $1 billion, including Microsoft shares, for clients.

Representatives for Microsoft and Facebook declined to comment.

Zuckerberg has repeatedly said his company wants to remain independent and is seen as preparing to float itself on the stock market eventually.