Microsoft Says It's Not Buying Electronic Arts

But Thursday, Microsoft quashed the rumors and said it's not interested in buying the popular video game developer.

"We have no plans to acquire EA," said Phil Spencer, corporate vice president of Microsoft Game Studios, in an interview with Reuters. "They remain a very important partner to us. No acquisitions."

Microsoft's denial sent EA shares down more than three percent in midday trading Thursday. In the past year, EA's share price has fallen by half as a result of intensifying competition in the video game market as well as EA's heavy investment in the foundering Sony PlayStation 3 console.

Electronic Arts has had its share of suitors, with Time Warner and Walt Disney each having made previous acquisition overtures. With a market value of $6.5 billion, EA isn't exactly a bargain, but an acquiring company would gain Madden NFL and EA's other sports titles, not to mention the wildly popular video game-cum-cultural phenomenon known as Rock Band.

Microsoft has poached key talent in the past, in spite of the close partnership ties between the two firms. In June, John Schappert, the creative force behind many of Microsoft's best-selling games, returned to EA after a two-year stint at Microsoft, taking over as EA's CEO. At Microsoft, Schappert helped boost Xbox Live sales and drove development of popular games such as Halo, Motorsport and Gears of War.

Microsoft in June unveiled Project Natal, a system that lets users play and interact with games without a controller using facial recognition that's captured on a 3-D motion-capture camera.

Introduced at the E3 videoconference in Los Angeles, the Project Natal camera can translate 3-D body movements for interactive games and other features. The product will work with all incarnations of the Xbox 360 console.