One of the worst kept secrets is that Hulu, the TV streaming service, is out looking to sell itself, and at one point it was speculated that Microsoft was one of the companies bidding for ownership.

Well, according to Bloomberg Microsoft has decided to drop out, or so says the “person in the know”; but that doesn’t mean that it couldn’t jump back in at some point.

Microsoft, based in Redmond, Washington, told Hulu executives last week it wouldn’t continue into a second round, said the person, who wasn’t authorized to talk publicly. The person didn’t rule out Microsoft re-entering later.

Hulu bankers at Morgan Stanley (MS) and Guggenheim Partners met in the past four weeks with Microsoft, which already rents and sells films and TV shows through its Xbox video-game console, to solicit an offer, people with knowledge of the situation said on July 1. The bankers also met with Google Inc. (GOOG), Yahoo Inc., AT&T Inc. (T) and as many as eight other companies, they said.

Elisa Schreiber, a spokeswoman for Los Angeles-based Hulu, declined to comment, as didFrank Shaw, a spokesman for Microsoft.

Probably the only reason Microsoft would even think of jumping back in is if the remaining bidders were Apple and Google, as I don’t think Microsoft would like the idea of either of those companies having an increased hold on streaming media on the web.
[Cross-posted at Winextra]