Microsoft Corporation (MSFT) Eyeing Netflix Inc. (NFLX)?

Microsoft Corporation (NASDAQ:MSFT) has been pushing hard to become more of a presence in the American living room, so it has been working to transition Xbox 360 from a game console to an entertainment console. Most recently, it launched Xbox Music service, and it has been working to continuously develop a video presence, primarily trying to develop its own service. But what if Microsoft Corporation (NASDAQ:MSFT) took a shot at one of the video-streaming services that is already in the market, has an established brand – and which was sitting in your company’s board room up until recently?

Netflix, Inc. (NASDAQ:NFLX)

Yes, it did seem a little mysterious when successful Netflix Inc. (NASDAQ:NFLX) CEO Reed Hastings decided to step down from the Microsoft Corporation (NASDAQ:MSFT) board of directors a few weeks ago, without any real reason given – though, scheduling could be a factor, considering he’s running a successful, multi-billion-dollar company (market cap of just shy of $4 billion) and serving on the board at Facebook Inc. (NASDAQ:FB) at the same time. But there has been no real mention of why he decided to move on.  But one would think that if he simply had scheduling issues as the reason to step down, wouldn’t we all have heard that from Hastings himself by now?

There might be more to this. There is some conjecture out there that he might have left because Microsoft Corporation (NASDAQ:MSFT) might have been tossing around the idea of making a purchase bid for Netflix Inc. (NASDAQ:NFLX)? One writer is mulling over that possibility, saying that Netflix has an ever-expanding streaming video library that would be a boon to Microsoft Corporation (NASDAQ:MSFT) in its big to be the living room entertainment company in the digital home – using Xbox 360 as the gateway through television computing, videos and music. And when sees that Microsoft Corporation (NASDAQ:MSFT) has about $65 billion in cash laying around burning a hole in its pockets (though a Windows 8 failure might take up some of that, if it happens) and that it could buy Netflix Inc. (NASDAQ:NFLX) for just 10 percent of that cash and pay Netflix shareholders a 60-percent premium on their current holdings.

Is there something to this? No one really knows for sure, but the rumor was enough to send shares of Netflix Inc. (NASDAQ:NFLX) up more than 9 percent in light trading Friday to more than $67 per share. Microsoft Corporation (NASDAQ:MSFT), meanwhile, moved up more than 1 percent on the day to north of $28 per share. Investors like billionaire fund managers Seth Klarman of Baupost Group and George Soros of Soros Fund Management will certainly be keeping their ears to the ground about this.