Why Microsoft needs to buy Netflix

Microsoft CEO Steve Ballmer is succeeding at wringing profits from PC software that many had written off in the age of cloud computing. But he's not very good at finding new sources of growth as cloud computing takes center stage. Which is why the answer to Microsoft's problems isn't firing Ballmer, but in bringing on a co-CEO. Ballmer is the consummate chief operating officer, overseeing the day-to-day operations of a tech giant facing tough competition on many fronts. He is not a visionary, he's blind to the ways that technology and markets are evolving. Bill Gates served as a good counterbalance, then Ray Ozzie tried to fill that role for a few years. But Microsoft's culture is so entrenched that it needs a visionary with a stubborn streak and a track record of success as a CEO.

Who could fill this role? Some names have been tossed around, but the best answer may be sitting on Microsoft's own board. Reed Hastings has shepherded Netflix to a $14 billion market value, defying odds and overcoming obstacles to make Netflix a key player in cloud-based content. Microsoft has $50 billion in cash lying around, so it could buy Netflix and still have plenty enough left to buy Nokia if it wanted. Buying Netflix and installing Hastings as co-CEO would position Microsoft to return to the center of the tech industry. Netflix could speed the Xbox' transition from a gaming console to a mainstream device connecting TVs to the Internet. Its success in creating a popular, immersive app for tablets could strengthen the appeal of mobile carriers considering Windows Phone 7 as a platform. Microsoft's investment in Facebook could help Netflix find a strong presence in that social network. And Hastings, who has a deep understanding about the opportunities and obstacles facing cloud-based content, could focus on pushing Microsoft into the future while Ballmer oversees the traditional PC-software businesses.

Of course, the move might distress Netflix customers, who would fear the company getting lost inside Microsoft's rigid corporate culture. But the question facing Microsoft shareholders in recent months is, what is the best way for the company to turn the stock price around? The answer to that question isn't Bill Gates returning. It's Microsoft buying Netflix and Ballmer sharing the CEO spot with Hastings.