After stringing investors along for months, Microsoft ( MSFT) finally agreed to draw down its cash this week -- just two days before the company is expected to deliver strong fourth-quarter earnings.

Trouble is, Microsoft shares inched up less than 2% Wednesday, a day after it announced a three-pronged plan to distribute its cash stash. The stock couldn't break through the $30 ceiling, a resistance point since last September.

Bulls may argue that's just another buying opportunity, but Microsoft's performance this week still brings up a pesky question that has hounded the software colossus for some time: What will it take to put the spring back into Microsoft's stock?

Some are looking to the fourth-quarter earnings report for help. One line of thinking is that Microsoft deliberately announced its cash plan before earnings because it didn't want to distract investors from strong numbers. In past quarterly conference calls, repeated questions about the company's ever-ballooning cash treasure have overshadowed Microsoft's results.

"I think one of the reasons they did this announcement early this week was this clears the deck for them ... to talk about the operations of the company and the growth prospects of the company," said Sanford C. Bernstein analyst Charlie Di Bona, who has an outperform rating on Microsoft. (His firm doesn't do investment banking.)

For the just-completed quarter, analysts are expecting Microsoft will earn 29 cents a share on $9 billion in revenue, representing an 11.5% jump in the top line from a year ago. But several analysts have said that they wouldn't be surprised if healthy PC and server demand help Microsoft deliver stronger-than-expected earnings and revenue numbers.

Another attention-grabber Thursday will be deferred revenue -- an indicator of how many customers are renewing contracts to buy Microsoft software on a subscription basis. Most analysts are modeling for a $300 million to $350 million increase in deferred revenue.

Still, analysts are certain to focus on the cash package -- particularly its effect on guidance for the fiscal year, which the company said it will update to reflect the new plan. Under the $75 billion plan announced Tuesday, Microsoft will hand out a special one-time $32 billion dividend, double its regular dividend on an annual basis and buy back up to $30 billion in stock over the next four years.

Because there are so many uncertainties -- including how much stock Microsoft will buy back each year and how much interest it has been earning on its cash -- analyst expectations for how the package will effect earnings are all over the map. Forecasts range from no impact in fiscal 2005 to a hit of as much as 12 cents a share as a result of lower interest income.

Microsoft's latest guidance calls for earnings of $1.31 to $1.33 a share, excluding stock-based compensation charges, on revenue ranging from $37.8 billion to $38.2 billion in fiscal 2005. The consensus gathered by Thomson First Call, which does not account for the cash plan, calls for Microsoft to earn $1.34 a share on $38.6 billion in revenue in fiscal 2005, which began July 1.

But even quarterly numbers, guidance and the company's new stance on cash may not be enough to sway some investors. As much as Microsoft management might insist otherwise, a stubborn group of investors remains convinced that Microsoft's extremely successful cash cows -- Microsoft Windows and Office -- have resulted in large-enough numbers to make the days of heady growth a thing of the past for the world's largest software maker.

"I think this is a great first step -- what they've announced so far," Jim Fisher, a portfolio manager with Univest Wealth Management and Trust in Souderton, Pa., said of Microsoft's cash plan. "But I think it's going to take something else to really give the stock a good kick."

It's not going to be earnings, but instead maybe a new product or bold acquisition, said Fisher, whose firm's $900 million in assets under management include Microsoft. For now, though, "I just don't see where their innovation is going to come from," Fisher added.

Or perhaps Microsoft just plods along as one of those solid money-making companies that aren't overly exciting but pay a good dividend and are a good investment, like 3M ( MMM) or General Electric ( GE), Fisher said.

Microsoft and its supporters, of course, would bristle at that suggestion. Di Bona suggested the company may use its July 29 analyst day to address the bigger picture, including the company's growth prospects. "If people are of an open mind to listen, I think the company is in a position tell a pretty compelling story," he said.

Di Bona cited a number of possible contributors to growth. Among them: the release of Service Pack 2 in August, a free Windows update that he believes could drive upgrades to Windows XP; the server and video game businesses; digital rights management, in their early phase of adoption; and further out, the next release of Windows, code-named Longhorn, launching in 2006.

Tony Ursillo, an analyst with Loomis, Sayles & Co., agreed video games could be lucrative for Microsoft but raised concerns about Longhorn, a frequently cited catalyst for the stock. " Longhorn is really far out and nobody has confidence in the time frame for the release," he said.

"I think the stock is roughly fairly valued relative to its prospects," said Ursillo, whose firm's $10 billion in holdings include Microsoft. He sees only two things that could really move the needle: more details on Longhorn or significant margin improvement driven by a cost-cutting drive. (Earlier this month, Microsoft announced that it plans to shave nearly $1 billion in costs this year in such areas as advertising and marketing.)

Even less enthusiastic was Frank Husic, CIO of San Francisco-based Husic Capital Management, which has $700 million under management. Husic maintains Microsoft is overvalued and doesn't offer much opportunity for making money -- an argument he makes for other large-cap tech stocks such as Intel ( INTC) and Cisco Systems ( CSCO) as well.

"There's too much market capitalization relative to its growth prospects and its size," Husic said, defining size as the company's revenue. In Microsoft's case, he noted, the company's market cap is nearly eight times its revenue, while its price-to-earnings ratio is two times the earnings growth rate of the company.

"I think the stock will just be flat," Husic said. "It's sort of developing a little bit of the IBM ( IBM) problem: When IBM got so big, it couldn't grow any faster otherwise it would have become the whole economy."

In other words, if Husic is right, Microsoft may simply have become too big to have any spring left in its stock.

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