WSJ.com - Microsoft Growth Is Flat, But Some See 'Value' Stock

WSJ.com - Microsoft Growth Is Flat, But Some See 'Value' Stock: "Microsoft -- known affectionately as Mister Softie among Wall Street traders -- has done so poorly some people are starting to look at the company as, believe it or not, a value stock. Microsoft shares trade at a multiple of about 26 times earnings of the past 12 months. That is high compared with the historic P/E of the market, of course, but downright cheap compared with other tech stocks. The P/E on the Nasdaq 100 is a heady 64. Microsoft traded with a P/E of 76 in 1999, when it was viewed as the preeminent growth stock.
Microsoft now is cheaper than the overall market, which trades at a P/E ratio of 27, according to Birinyi Associates, a money-management firm. It is all attracting incipient interest from some savvy value investors. The company's dividend, while smallish at 16 cents a share, is another piece that attracts value investors hunting among tech stocks.
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The best hope for the stock might be a new upgrade cycle, perhaps sparked in part by the very viruses hurting Microsoft's sales.
"As Microsoft and the antivirus companies drop their support for older versions of Windows, customers may have little choice but to upgrade to Windows XP to protect their systems," says one large hedge-fund manager who shifted out of Microsoft this year but might get back in. "Antivirus could be the Y2K of 2004," spurring sales and sending Microsoft shares higher."