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Microsoft-Sega speculation bobs up

Reports in a Japanese newspaper bring back rumors that Microsoft may be considering buying some or all of Sega.

Rumors that Microsoft may be considering buying some or all of Sega are resurfacing after reports in a Japanese newspaper.

Sega, maker of some of the most popular game titles, has made no secret that it's looking for suitors. And Microsoft recently bought another game maker, as it seeks an edge for its Xbox player in the super-competitive gaming world.

This week, the Daily Yomiuri newspaper in Japan said that Microsoft has indicated to Sega that it would like to buy a stake in the company. Representatives from both companies declined to comment.

Sega, maker of the popular "Sonic the Hedgehog" games, put itself up for bid a few months ago. In February, the company said it was planning to merge with pinball machine company Sammy for an undisclosed sum. But it's been entertaining other offers since then, including one as recently as last week, when Sega said Japanese rival Namco, maker of Pac-Man, was seeking to buy it. Rumors have also named Electronic Arts as a suitor.

Sega of America spokeswoman Gwen Marker would not comment specifically on the report and would only say that the company held a board meeting in Japan Tuesday to talk about the Sammy and Namco deals. "Right now the only offers that are on the table are from Namco and Sammy," she said.

Meanwhile, one analyst said the notion of Microsoft buying all or part of Sega isn't that far-fetched.

David Cole, president of game industry researcher DFC Intelligence said it's only natural to think that Microsoft might also be interested in courting Sega. "Microsoft is going to be the first name that jumps into mind because they're expanding so rapidly in this area and are probably in a better position than any other company to make a purchase," Cole said. He said a Sega purchase would give Microsoft a pipeline to original content. "Sega's got some of the largest assets in the gaming industry," he said.

This buzz comes after the Asian Wall Street Journal in March reported that Microsoft was considering making a bid for Sega.

Acquiring content is often less challenging than creating it from scratch, a process that is expensive and requires game makers to predict the preferences of the fickle game player. Last year, Microsoft snapped up game maker Rare, the British developer best known for titles such as "Donkey Kong 64" and "GoldenEye," for $375 million.

Microsoft and Sega have close ties. Sega of America's former president, Peter Moore, resigned in January and joined Xbox.

Still, Cole thinks the odds of a Sega sale to Microsoft actually going through are less than 50 percent. He said Microsoft might have trouble absorbing a company as large as Sega.

Sega, once a pioneer in the gaming industry, has been struggling in recent years. In 2001, the company shifted its focus, exiting the hardware business and concentrating on third-party game development for the consoles it used to compete with, including Sony's PlayStation2, Nintendo's GameCube and Microsoft's Xbox.