Here is what I wrote about Microsoft in May of 2006:
What price would I be buying Microsoft at? Like I said, this isn't normally the kind of company I would be buying. It is definitely in an industry where there is a lot of uncertainty – at least beyond the Windows franchise (which I do think is completely secure).
For the most part, this is a stock I wouldn't be able to value well enough to buy, because of the future and my lack of understanding of the business.
Having said that, I would certainly buy shares if they reached $17. Before that, I would have some trouble making a decision. The margin of safety simply wouldn't be wide enough in an area I don't understand that well. Maybe I will get a better feel for the company and its competitive position as I look into the stock some more (and write about it here). But, unless and until that happens, it would be hard for me to buy at a price much greater than $17 (where I think it would pretty much be a sure thing).
Because of share buybacks and other changes since 2006, my sure thing price would now be more like $17.50.
Earnings power in terms of free cash flow is probably around $1.75 a share.
No entrenched, wide-moat business this size trades for 10 times its cash earnings power.
Is Microsoft a growth stock?
Is it cheap?
If you need to buy a big cap stock, buy Microsoft at $17.50 or less.