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Microsoft ( MSFT) lacks the hipness of tech darlings Apple ( AAPL) and Google ( GOOG), but its shares are too cheap to ignore.

Unlike Amazon ( AMZN), Apple, Google and Research in Motion ( RIMM), Microsoft is trading at a discount. The stock has fallen 32% in the past year, more than the 29% drop in the S&P 500 Information Technology Index. But if you consider the company's earnings potential, cash flow and sales, it might be a good time to buy the shares, which are down 40% from their 52-week high of $32.10.

TheStreet.com Ratings

Analysts have dismissed Microsoft as passé, out of touch and stodgy. They've predicted for years that innovators Google or Apple would dethrone the software giant. That probably won't happen anytime soon: Microsoft has plans to not only keep, but expand, its reach.

The Redmond, Wash.-based company has one of the industry's most diverse revenue streams. Despite the failure of its despised Vista operating system, the company's Windows products still control 88% of the global operating system market. Its Internet Explorer is the favored browser of 67% of Web users, according to market researcher Net Applications.

Microsoft gambled on video games in 2001 with its Xbox system. Eight years later, the Xbox 360 outsells Sony's PS3 console in a fiercely competitive market, according to research firm NPD Group.

Sure, Microsoft was slow to jump into the lucrative portable device market that archrival Apple dominates with its iPods and iPhones. But Microsoft's office software remains the products of choice for business customers.

People speculate that Google's free software will challenge Microsoft's business model. Conversely, Microsoft's forthcoming new search engine could enlarge its 5% share of the search market and chip away at the 81% controlled by Google, according to Net Applications data.

The company plans to launch the new service, nicknamed "Kumo," this spring. The product will aim to offer more focused results, which could help advertisers target their audiences more efficiently. Microsoft will spread the word on Kumo through a $100 million marketing campaign.

Microsoft shareholders have taken a beating in the past year. The company's earnings fell short of analysts' forecasts in the most recent quarter. Net income fell 11% to $4.2 billion on $16.6 billion of sales, a 2% increase from the year-earlier period. Microsoft has been cutting staff and other costs to reverse the situation.

While investors have taken a hit, they get plenty in return. The company has a clean balance sheet with $21 billion in cash, enough to stomach a prolonged downturn or make a big acquisition. Microsoft's 2.8% dividend yield almost doubles the 1.5% average of companies in the S&P 500 Index.

A company with abundant cash, big dividends and new products lined up seems like a potential winner. When the recession lifts and people start buying computers again, Microsoft will be in a good position to grow.

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