Microsoft is in talks to buy a stake in Facebook for a price that would value the social-networking site at around $10 billion, according to the Wall Street Journal.

Citing unnamed sources, the Journal reports that Microsoft could acquire as much as 5 percent of Facebook's business for $300 million to $500 million. This could set up the latest battle between Microsoft and Google, which has also expressed interest in Facebook.

Facebook has indicated that it might seek a higher valuation, perhaps as much as $15 billion, according to the Journal.

The talks with Microsoft could be stemming from an exclusive advertising deal the software giant reached with Facebook last year. According to the Journal, the two companies are also considering expanding that deal, which now covers only U.S. sites and expires in 2011.

Microsoft views the 5-percent-stake purchase in Facebook as both a bulwark against Google's growing social-networking ambitions and as a "foot in the door" toward buying more of the company, which has thus far spurned its efforts to buy it outright, according to a source with knowledge of the deal.

Facebook, which competes with News Corp.'s MySpace, is a networking site used by more than 40 million people. It has raised in excess of $40 million from outside investors, including PayPal founder Peter Thiel, and the venture capital firms Accel Partners and Greylock Partners.  

In an interview with The Deal earlier this summer, Thiel said that Facebook is on track to make $150 million in revenues in 2007, and about half of that will come from its partnership with Microsoft.

He also said the reason why Facebook isn't planning an I.P.O. or a merger anytime soon is because there is such a big gap between how it values itself and what others believe it's worth. At the time, Thiel said he believed it was worth $7 billion to $10 billion, while the market was valuing it at $3 billion.

"If we got an offer from someone for $10 billion, we probably would listen to them," Thiel said in July. "I don't think we're going to get that offer, and we're not going to solicit it."

Little did he know, he already did.