Source says Alan Mulally now a frontrunner to become Xbox maker's new chief executive officer.

Ford CEO Alan Mulally is a top candidate to replace outgoing Microsoft CEO Steve Ballmer as the Xbox maker's top executive, the Wall Street Journal's AllThingsD reports.

Mulally denied that he was leaving the Detroit-based car company earlier this month, telling AllThingsD that, "I continue to be focused on serving Ford."

Sources with knowledge of the situation told the site that the 68-year-old Mulally was not warm to the idea of joining Microsoft at first, but has become more interested of late.

Mulally has been CEO of Ford for seven years. Prior to that, he served as CEO of Boeing Commercial Airlines in the Seattle area.

Shortly after Microsoft acquired Nokia for $7.2 billion, it was reported that CEO Stephen Elop would be a top contender for the Microsoft CEO job. However, sources told AllThingsD that there has been a "shift" in recent weeks away from Elop and toward Mulally.

Mulally and Microsoft have reportedly not yet entered "formal" contract negotiations, but discussions about the position are said to be "serious."

In August, Ballmer announced that he would retire in the next 12 months and will officially step down once his replacement is found.

Microsoft's board of directors has established a special committee to direct the selection process for Ballmer's successor. This committee is chaired by the board's lead independent director, John Thompson, as well as chairman of the board Bill Gates, among others.

The board is working with executive recruiting firm Heidrick & Struggles International Inc., and will consider both internal and external candidates, Microsoft said.

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