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Reed Hastings

There’s been plenty of chatter in recent weeks about why Steve Ballmer should be replaced as CEO. He missed mobile. He screwed up tablets. And he’s been unable to bring the stock back to life. Now, here’s one of the more interesting theories we’ve heard about mixing up the executive ranks at Microsoft. Fortune’s Kevin Kelleher floats a theory that Microsoft should buy Netflix and appoint Reed Hastings as co-CEO along with Steve Ballmer.

It is a wild idea, and it may never happen. But Kelleher makes some interesting points about why the Netflix boss — who also happens to sit on the Microsoft board — might be the right guy to get the software giant back on its feet.

Kelleher writes:

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.

Hastings, interestingly enough, was asked point blank about running Microsoft a few day ago by journalist Kara Swisher of All Things Digital. Hastings, who founded Netflix in 1997, brushed off the possibility.

“No, I’m going to run Netflix for as long as I do, and then I do a lot of education, non-profit work,” he said.

Microsoft certainly has enough cash in the bank to pull of the deal. It maintained a cash pile of $50 billion at the end of the last quarter, and Netflix’s market value now stands at $13.7 billion.

It would probably have to “pay up” to gobble up Netflix. And that could be a very expensive “talent acquisition.”

Previously on GeekWire: “Chart: Steve Ballmer’s approval rating plummets among Microsoft employees”

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