SEATTLE (REUTERS) - Shares of Microsoft Corp jumped to their highest since mid-2000 on Wednesday, a day after Reuters reported that the world's largest software company is closing in on appointing a new chief executive

In addition, an influential analyst suggested the appointment of an outsider as chief executive officer (CEO) could result in the sale of Microsoft's Bing and Xbox units, which would bring instant gains.

The stock jumped almost 4 per cent to hit $38.08 in midday trading on Nasdaq, a level last seen in July 2000, when the tech stock bubble was deflating. The stock pared gains in early afternoon, trading at $37.83.

Late on Tuesday, Reuters reported that Microsoft had narrowed its CEO shortlist to replace Steve Ballmer to about five external candidates, including Ford Motor Co chief Alan Mulally, and three or more internal candidates. Microsoft declined comment.

Mr Ballmer in August said he would step down within 12 months.

Many investors favour an outside candidate such as Mr Mulally as they believe he would bring radical change to Microsoft, which has struggled to adapt to the age of mobile computing led by Apple Inc and Google Inc.

Well-connected Nomura analyst Rick Sherlund, who worked closely with Microsoft on its initial public offering in 1986, in a note to clients on Wednesday said it was "likely" that Mulally would be the new CEO by December.

He theorised that an outside leader such as Mr Mullally might quickly sell Microsoft's Bing search engine and Xbox game console businesses, which he said could yield a 30 cents to 40 cents per share benefit in fiscal 2015.

Combined with potential cost cuts and increased share buybacks, Sherlund said prospects for the stock were more attractive than many investors think. He raised his share price target to US$45 to from US$40.

The last time that Microsoft stock traded as high as US$45, split adjusted, was early 2000. It hit an all-time split-adjusted high of US$59.97 near the peak of the tech stock bubble in late December 1999.