Rumor: Microsoft interested in buying CrowdStar

[matt247]

By Adam Satariano, Serena Saitto and Dina Bass

Feb. 11 (Bloomberg) -- Microsoft Corp. is among companies in talks to buy CrowdStar, the creator of games for social- networking site Facebook, according to two people familiar with the matter.

A decision on a sale may be weeks away, and closely held CrowdStar might choose to stay independent with investment from a private equity firm, said one person, who declined to be identified because the talks are private. CrowdStar, whose offerings include the virtual fish-care game “Happy Aquarium,” may be valued at $200 million, the other person said.

Games on Facebook gained popularity in the U.S. last year, prompting Electronic Arts Inc. to purchase Playfish Inc., the maker of “Pet Society” and “Restaurant City,” for as much as $400 million. CrowdStar is the fourth-largest developer of applications for Facebook Inc.’s social network, with more than 50.8 million monthly active users, according to AppData.com, a Web site that tracks application usage on Facebook.

Peter Brooks, a spokesman for Burlingame, California-based Crowdstar, declined to comment, as did Microsoft General Manager Mike Ybarra, who heads the company’s Windows games unit.

The U.S. market for games played on social networks, including Facebook and News Corp.’s MySpace, will triple to more than $2 billion by 2012, according to ThinkEquity LLC. The growth contrasts with a 9.8 percent drop last year for U.S. purchases of games played on Nintendo Co.’s Wii, Microsoft’s Xbox 360 and Sony Corp.’s PlayStation 3, NPD Group Inc. said.

MSN Games

MSN Games, a unit of Redmond, Washington-based Microsoft, offers more than 1,000 online games, including “Bejeweled,” “Mah Jong Tiles” and “Spades.” The Web site competes with services from Yahoo! Inc. and AOL Inc.

This month, Zynga Inc. began letting users of Microsoft’s game site play its “FarmVille” game. San Francisco-based Zynga has more than 232 million monthly active users, according to AppData.

Valuations for Zynga and its peers were established when Electronic Arts bought Playfish, Jesse Divnich, an analyst with researcher Electronic Entertainment Design & Research, said last year. Zynga may be valued at $1 billion should the company be taken public, said Terry Schallich, head of capital markets at Pacific Crest Securities, a technology-focused investment bank.

Games on social networks such as Facebook and MySpace are free. The makers of the titles generate revenue by selling virtual goods.

Microsoft’s Xbox Live online game service, which allows players to access their Facebook accounts, has about 23 million users. The company is trying to develop more online and community-based games, Phil Spencer, the vice president of Microsoft’s game studios, said in July.

Microsoft rose 13 cents to $28.12 at 4 p.m. New York time in Nasdaq Stock Market trading. The shares have fallen 7.7 percent this year.

To contact the reporters on this story: Adam Satariano in San Francisco at [e-mail]; Serena Saitto in New York at [e-mail]; Dina Bass in Seattle at [e-mail]

Last Updated: February 11, 2010 16:36 EST