Microsoft Bid Rumor Sends Netflix Stock Soaring29 Oct, 2012 By: Erik Gruenwedel
Speculation late Friday, Oct. 26, that Microsoft is again interested in acquiring Netflix sent shares of the subscription video-on-demand pioneer up more than 13% — just days after it reported lower-than-expected subscriber additions.
Despite non-comments from both Microsoft and Netflix (the latter as a rule does not comment on market speculation), the service’s 30 million streaming subscribers could offer Microsoft a market leadership position over rivals Amazon and Google in the burgeoning SVOD market.
Speculation began earlier in the month when Netflix CEO Reed Hastings announced he would step down from Microsoft’s board before Thanksgiving. Microsoft’s board couldn’t seriously entertain making a bid for Netflix with its CEO sitting in the room.
With Netflix shares down 50% this year (and 80% from before the price-hike debacle in 2011), the SVOD service is easier to afford, especially to deep pocket suitors capable of paying two-times Netflix's market capitalization. Also, Microsoft has made no secret its desire to transform the Xbox 360 from video game console to in a media entertainment center.
That was the same cause of speculation forwarded in late 2009 when select analysts publicly implored Amazon (and Microsoft, Google and Apple) to acquire Netflix, which, of course never materialized.
Eric Savitz, technology blogger with Forbes.com, surmised that rapidly approaching Hurricane Sandy on the East Coast and the San Francisco Giants pending World Series sweep of the Detroit Tigers contributed to the scuttlebutt.
“If ever there were a time to be floating rumors, this is the time, while attention spans are short and trading volume is thin,” Savitz wrote in an Oct. 26 blog.
Regardess, Netflix shares closed Oct. 26 up $8.07 per share to $69.58 on trading volume three times the daily average. In other words, Netflix gained nearly $450 million in market cap by the end of the day.