Microsoft's Window for Growth Slams Shut

Updated from 12:43 p.m. EST

SAN FRANCISCO -- With tech stocks down about 9% from the head-fake rally they completed in the year's first week, one couldn't blame investors for beginning to think about bargain-hunting.

The problem comes in figuring out when, if ever, these new rock-bottom prices are going to turn higher, and how long they'll stay there.

Take Microsoft(MSFT), for example. The software maker's stock has been as unpopular as a credit-default swap in 2009, plunging 20% to a 52-week intraday low on Friday of $16.75 from its recent Santa Claus rally high of $21.

On Monday, shares bounced back 3.1%, to $17.73 before settling a bit lower at $17.34.

A quick eyeballing of the relative performance of Microsoft shares and the Nasdaq over the past three months screams the idea that the stock's selloff, at least relative to other tech issues, is a tad overdone.

While the Nasdaq closed Friday down about 8% from three months ago, Microsoft had fallen 23%.

As unpleasant as the company's second-quarter earnings report last Thursday was, it would be instructive for traders still kicking the tires of the likes of Yahoo!(YHOO) or Advanced Micro Devices(AMD) (or any semiconductor stock, really) to remember that Microsoft still offers the proverbial rock in the sea of tech-stock instability.

That is, after having your expectations about an economic recovery in 2009 deflated on an almost daily basis, have you no room in your portfolio for a stock with a $158 billion market cap that continues to generate $20 billion in annual operating cash flow while storing another $20 billion in cash in the cupboards?