Streaming video services provider Netflix,
Inc.(NASDAQ:NFLX) saw its shares spike on Friday after rumours
began to spread that Microsoft Corporation(NASDAQ:MSFT ) may be interested
in acquiring the company.
Of course, not everybody was buying the rumour as it sounds
rather far-fetched.
The genesis of the rumour seems to lie in the recent
announcement that Netflix Chief Executive Reed Hastings has decided to step
down from the board of Microsoft.
The conclusion that people have jumped to is that if
Microsoft was indeed going to buy Netflix, it would get rid of Hastings as it
cannot have him hanging around being privy to any information about bid prices
as that would tantamount to insider trading.
There could be a hundred other reasons for Hastings to
quit the Microsoft board, including his busy schedule, other commitments or
Microsoft's push into content with XBox may have turned up the heat on
competition. XBox 360 is being used by the company more as an entertainment
device than merely as a gaming console.
Netflix is facing a lot of competition from new
players in the segment, most specifically Amazon. Hastings needs to devote all
his time to ensure that the company maintains its leadership position in the
segment.
Netflix has a market capitalisation of $3.7 billion
and is currently trading at roughly half of its 52-week high. It is a dominant
player in streaming video content across almost all electronic platforms.
Microsoft is a cash-rich company with nearly $70 billion worth of it. An
acquisition or a stake buy would sit pretty well for both companies.
Microsoft has the reputation of buying out Web brands.
It did that with Hotmail, Skype ad tried it with Yahoo too.
However for the moment it seems to be merely a lazy
Friday afternoon rumour.
Shares in Netflix soared over 13 percent to close at
$69.58 on Friday, erasing earlier loss made on Wednesday on poor
outlook. For the week, the stock rose over 7% and saw a recover of 21% from
week’s low of $57.40.
No comments:
Post a Comment