Updated from Wednesday, Sept. 23

REDWOOD CITY, Calif. ( TheStreet) -- A Microsoft ( MSFT) spokesman said late Wednesday the company has "no plans to acquire" video game maker Electronic Arts ( ERTS), according to a report from MarketWatch.

A Reuters report, citing information from traders, circulated Wednesday saying the software giant was interested in buying EA, the publisher of the Madden, Medal of Honor and FIFA video game series.

Shares of Electronic Arts rose $1.31, or 7.1%, to close at $19.83 on Wednesday. The stock fell 32 cents to $19.51 in after-hours trading.

Although it was merely a rumor, an acquisition would boost Microsoft's presence in the video game space. The sector, however, has struggled to live up to its recession-proof billing, although this could mean an attractive valuation for M&A targets.

U.S. video game sales fell in August for the sixth straight month, according to figures from NPD Group, and analysts highlighted disappointing sales for the latest game in the Madden series.

EA, which was recently downgraded by Goldman, nonetheless has a potent weapon in its armory. The Redwood City, Calif.-based firm, which competes with Activision Blizzard ( ATVI) and Take Two Interactive ( TTWO), recently launched The Beatles: Rock Band game, which is expected to be a top seller this holiday season.

Shares of Microsoft fell 6 cents in the regular session to end Wednesday at $25.71. The stocks gained 2 cents after hours.

-- Written by James Rogers in New York.