Microsoft's Chief Executive Steve Ballmer told reporters in Mumbai today that his firm's 1.6 percent stake in Facebook for $240 million was an important investment, not a mistake.

"We didn't make a mistake," Ballmer said. "The valuation of Facebook is still to be determined. Certainly today, it's very, very popular. So for a company like ours that wants to be a pre-eminent presence in this space, it's very important for us."

Analysts have said Microsoft paid a steep price on a bet that the three-year-old firm would be able to transform itself into a hub for all sorts of web activity.

Facebook is set to make an announcement about a "new way of advertising" on Tuesday.

Asked if Microsoft was interested in buying Yahoo! Inc, Ballmer said: "My answer is a considered 'no comment.' We want to succeed in the online advertising space. What happens with Yahoo, we'll all have to wait and see."