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Will Costly Options Hurt Facebook?

High valuation from MS could slow recruiting in Silicon Valley

By Colleen Barry,  Newser Staff

Posted Oct 28, 2007 10:16 PM CDT
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(Newser) – Microsoft's recently purchased stake in Facebook may make it harder for the social networking site to hire talented employees, reports the Wall Street Journal. By selling a 1.6% stake for $240 million, Facebook increased its valuation to $15 billion, in turn radically increasing the cost of stock options, which are a vital part of many Silicon Valley compensation packages.

Stock options allow employees to buy shares of their companies at a preset price; the lower the price, the greater the potential profit, and the more appealing they are as a non-cash part of a compensation package. The higher options price could hinder Facebook's plan to double its staff in the next year, although other companies valued in the billions have still managed attract new recruits.

Microsoft CEO Steve Ballmer smiles during a talk at the Web 2.0 conference in San Francisco, Thursday, Oct. 18, 2007. (AP Photo/Paul Sakuma)
Microsoft CEO Steve Ballmer smiles during a talk at the Web 2.0 conference in San Francisco, Thursday, Oct. 18, 2007. (AP Photo/Paul Sakuma)   (Associated Press)
Microsoft Corp. founder Bill Gates smiles during a launch announcement at the Unified Communications Server 2007 conference in San Francisco, Tuesday, Oct. 16, 2007. (AP Photo/Paul Sakuma)
Microsoft Corp. founder Bill Gates smiles during a launch announcement at the Unified Communications Server 2007 conference in San Francisco, Tuesday, Oct. 16, 2007. (AP Photo/Paul Sakuma)   (Associated Press)
Facebook.com's mastermind, Mark Zuckerberg smiles at his office in Palo Alto, Calif. in this Feb. 5, 2007 file photo. Rapidly rising Internet star Facebook Inc. has sold a 1.6 percent stake to Microsoft Corp. for $240 million, spurning a competing offer from online search leader Google Inc. (AP...
Facebook.com's mastermind, Mark Zuckerberg smiles at his office in Palo Alto, Calif. in this Feb. 5, 2007 file photo. Rapidly rising Internet star Facebook Inc. has sold a 1.6 percent stake to Microsoft...   (Associated Press)
Facebook.com's mastermind Mark Zuckerberg smiles at his office in Palo Alto, Calif. in this Feb. 5, 2007 file photo. (AP Photo/Paul Sakuma)
Facebook.com's mastermind Mark Zuckerberg smiles at his office in Palo Alto, Calif. in this Feb. 5, 2007 file photo. (AP Photo/Paul Sakuma)   (Associated Press)
Facebook founder Mark Zuckerberg listens to a question during a talk at Web 2.0 conference in San Francisco, Wednesday, Oct. 17, 2007. (AP Photo/Paul Sakuma)
Facebook founder Mark Zuckerberg listens to a question during a talk at Web 2.0 conference in San Francisco, Wednesday, Oct. 17, 2007. (AP Photo/Paul Sakuma)   (Associated Press)
Facebook.com's mastermind, Mark Zuckerberg smiles at his office in Palo Alto, Calif., in this Monday, Feb. 5, 2007 file photo. (AP Photo/Paul Sakuma, FILE)
Facebook.com's mastermind, Mark Zuckerberg smiles at his office in Palo Alto, Calif., in this Monday, Feb. 5, 2007 file photo. (AP Photo/Paul Sakuma, FILE)   (Associated Press)
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social networking • Google • Microsoft • Silicon Valley • Facebook • employment recruiting • stock options

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