Microsoft is mulling the idea of buying online video service Netflix, less than a week after entering the computing hardware business for the first time, according to rumours acknowledged by US business magazine Forbes.
With Netflix shares going up-diddly-up on the rumours and currently trading at US$ 69.58, the move would certainly be welcome news for investors hurt by the fallout of last year’s unpopular price hike and a disastrous rebrand of the DVD-by-mail business.
The takeover rumours point to the recent departure from Microsoft’s board of Netflix CEO Reed Hastings as strong evidence – and with a stockpile of nearly US$ 69bn in cash and investments, Microsoft could certainly afford to buy Netflix, a company with a market cap of “just” US$ 3.7bn.
Forbes columnist Eric Savitz points to Microsoft’s past predilection for buying established Web brands, such as Skype for US$ 8.5bn, and adds “There are a lot of reasons to think that a deal makes sense. But whether there’s anything more here than idle speculation… I have no idea.”
Editor’s view: If the rumours are true and Microsoft does make a bid for Netflix, it would be the latest in a series of increasingly bold moves by the Redmond firm, which have included the launch last week of the Surface tablet – its first computing hardware product.
The Skype parallel is significant for another reason too: the free video calling service looks set to be integrated into the Xbox games console as a way to make it appeal to more family members.
Buying Netflix would enable Microsoft to advance this vision further, as well as pull the world’s most popular online video service from rival devices such as Sony’s PlayStation 3 and Apple’s iPad.