Netflix stock appears to rise on Microsoft acquisition rumor

Netflix shares closed trading today up 13 percent, less than a week after the company disappointed Wall Street with a lackluster third-quarter performance.

Anyone looking earlier for news that might have explained what might be driving the spike would have been disappointed. But Forbes is now reporting that an unconfirmed rumor was behind the run. According to the magazine, word spread on Wall Street that Microsoft was trying to acquire Netflix. CNET also heard these rumors and saw an e-mail from a Wall Street banking firm that said showed one rumor circulating indicated Microsoft was offering $90 per share for Netflix.

A Microsoft spokesman declined to comment on rumor and speculation.

There are plenty of reasons to be skeptical here. Netflix investors have taken a beating the past year and the Microsoft rumors may be just an attempt to snatch back some losses.

The rumor comes during the same week that Netflix reported that it had missed third-quarter subscriber projections. Earlier in the year, Netflix said it expected to add 7 million new U.S. streaming subscribers during 2012. Netflix now expects, at best, about 5.4 million new streaming customers.

As for the rumors, the numbers I saw being passed around make little sense. Paying $90 per share is a big premium for a company that is struggling to meet its own growth projections and has lost about three quarters of its value in the last 18 months. Before the Microsoft rumors, Netflix shares were trading at $58.

http://news.cnet.com/8301-1023_3-57541539-93/netflix-stock-appears-to-rise-on-microsoft-acquisition-rumor/

Mmmmm...Interesting

Interesting. I use Netflix all the time.

......... trying to see why this would even be an investment that MS would consider. As long as studios keep raising the prices significantly, the Netflix model will be hard to sustain. They WANT to sabotage it, neuter it and force it to go away, then replace it with their own proprietary solutions.

No, I don't see this happening. It's a lose/lose situation.

Oh crap. I hope MS don't buy it :(

Wait, I take that back...it really doesn't matter. It's not like they will remove Netflix from the competitors devices. Skype is still on Vita right?

I am reasonably certain that you can ignore this rumor, because I am pretty sure that I am the one who started this particular rumor. The key to a good rumor, or informed sounding conjecture is to build a grand scaffolding around the kernel of something that sounds reasonable, and thus plausible. I started floating the idea a few months back, and just kept adding to it as I went. I am not boasting here. It is something that actually happens to me quite a bit.

Why would they buy Netflix when they can cut their own deal with movie/tv producers in the same vein that they cut a deal with music distributors? They can just call it Xbox TV and they won't be saddled with the historical deals that Netflix has made and/or the conflict of interest between Netflix and Amazon/Hulu which they also offer.

At $90 per share, how much would Netflix cost?

That'd make them worth $4.9B

The shares are 69.xx so I multiplied them by the rough difference between the rumoured offer and the current price/market cap.

@squilliam

You are assuming that those deals would be disadvantageous. The opposite could hold true, and that is probably the case given the markets expansion, and the greatly increased demand we have seen over the past few years. There is a reason we see new providers popping up like weeds. The business model works, and it generates a lot of revenue. Netflix was early to the market so it is very likely that they got a lot of content at what in the current market would be considered dirt cheap prices. Further more they probably locked in those rates for a number of years.

I have a good real life example to illustrate my point. My mother used propane to heat our house, and she was given a chance to sign a locked in rate contract from our supplier. It was a little bit more expensive, but it was for five years, and my mother thought it was a good deal to have a rate she could budget for. I am sure at the time the supplier thought they were making a killing, or they thought the price would go down.

Within a couple years the price of propane skyrocketed, and there was my mom sitting back pretty self satisfied about the whole situation. As she was paying less then half of what many of our neighbors were paying. What some people might have thought was a fools bargain ended up looking damned insightful, and that supplier was none too thrilled. They tried all kinds of things to get out of that contract, and they found out my mom wasn't a fool. She had them where she wanted them, and not the other way around.

My point being that for all you know Netflix might have a lot of providers by the short hairs, and they can't get out of the fixed rates they agreed to. Before they found out that those rights were going to increase in value many times over in just a couple years. I can tell you this a lot of our neighbors would have killed to have my mothers rates back then, because it could have saved them hundreds of dollars each year.

Not saying it is the case, but it is entirely possible.