With an eye on the social-networking craze, Microsoft is reportedly in discussions with Facebook that would have the software giant making an investment of $10 billion or more. With MySpace already a part of News Corp. (NWS), this leaves Facebook as the next social-networking site to be gobbled up or sponsored by a larger entity. Currently, the site is used by more than 40 million people and is expecting an annual profit of $30 million on $150 million in revenue. Google (GOOG) has reportedly expressed interest as well, so we could be on the cusp of a bidding war.

If MSFT succeeds with its investment proposal, it would give it a stake of roughly 5% in Facebook. Those close to the negotiations say this stake could be valued at $300 million to $500 million. Spokespersons with Facebook, MSFT, and GOOG all declined to comment.

Meanwhile, today's release of Halo 3 made September 25 a day many gamers were waiting for. While movie buffs stood in line for The Simpsons flick and Harry Potter fans anxiously awaited the Deathly Hallows release in July, fans of video games lined up to grab the third installment of the shooter game designed exclusively for the MSFT gaming platform. Halo 3, which has earned high marks with critics, is expected to generate sales of up to $200 million today alone. An analyst with Kaufman Brothers said yesterday in a client note that Halo 3 is expected to be the biggest videogame release ever, and should help to drive higher X360 hardware sales through the holiday season.

In mid-morning trading, MSFT shares are 1.2% higher and are fighting with overhead trendline resistance at their 80-day moving average. The stock has not managed to move above this trendline since late July.