64x being tame by dot com standards still doesn't make it cheap!

As for the earnings argument, look at it this way - Apple and Microsoft both made about 18B after taxes in 2010. Difference is, Microsoft's been printing money for almost a decade. Google doesn't even come close.

It's a fantastically profitable company. You can speculate about the future however you want, the fact remains that this company that until a year or two ago made more than Apple and Google combined is priced far below that combination.

It is a fantastically profitable company. A fantastically profitable company with the P/E ratio and historical growth rates of a public utility.

Why invest in Microsoft when you could invest in Exxon Mobile, Johnson & Johnson, The Coca-Cola Company, Novartis - all companies with better long term growth rates and beefy dividends.

Look, I am not trying to be discouraging, but I find it grating how little progress Microsoft has been able to make despite its huge market advantages.

Maybe the question is one of perspective. I tend to constantly think in terms of long-term investments. If you are investing because you intend to cash in on an upcoming bounce in the price (rather than holding on for the long term) then that is actually a sound strategy - I wish you luck in timing the bounce.

It's the long-term perspective that I am mostly referring to. That is the reason for the speculating about the future.

Disclaimer: I own none of the shares mentioned above - as a matter of fact I currently own no shares of anything.

Microsoft's had better earnings growth than any of the companies you listed. In the past 5 years Novartis grows its revenue from 30B to 45, MSFT does it from 51 to 62. Keep in mind that it gets harder the bigger you are - if you're already sucking 51B from your customers, how the hell do you find another 11?

The flaw with speculating about the future is that anything that's certain will be priced into the stock immediately. Any other "educated guesses" you make might as well go to a blackjack table.

A lot of people think they're being prudent just because they're investing with a "long-term perspective". That doesn't get you anything in and of itself - I can buy a car and hold onto it forever but it'll never appreciate (well, until it becomes an antique). It's true that you shouldn't daytrade, that you should be willing to stomach holding something even if it loses value. But that just makes it more important that you understand why you've chosen to hold onto this stock for so long. And I don't think speculation about the future is a good basis for that decision. If you can point to something in the present (e.g, 18B in net income) there's a lot more assurance that you're actually getting something for your money.

If Novartis has put on 50% or 15B, how is Microsoft doing better by putting on 22% or 11B?

Now, I'm not fully convinced that companies on that scale are really delivering the best market value to either shareholders or wider society compared to their functions being split across a network of smaller organisations that can stand or fall on their own merits, but still... other large companies exist and have done better.

"Keep in mind that it gets harder the bigger you are"

Generally, this is true, but no one is doubting MSFT's profitability right now, the doubts are with regards to MSFT's future profitability.

"The flaw with speculating about the future is that anything that's certain will be priced into the stock immediately."

Only in the very short term and with short-term information that is both publicly available to all investors and verifiably true - most information does not meet these criteria. The longer you move out on your time horizon the more uncertainty will impact the market price.

There is an enormous amount of literature out there with relation to determining the future price movements of volatile assets in markets with asymmetrical information (not everyone gets all news at the same time). You should google the "efficient-market hypothesis" as well as recent efforts to test the assumptions that it relies on. (Thanks to the fall-out that occurred immediately after the 2008 market bust there has been a lot of soul-searching in the investment management industry.)

"A lot of people think they're being prudent just because they're investing with a \"long-term perspective\". That doesn't get you anything in and of itself - I can buy a car and hold onto it forever but it'll never appreciate (well, until it becomes an antique)."

They don't have to think that they are being prudent - there is evidence to demonstrate the prudence of this strategy. There is a large body of research out there that has demonstrated that long-term investment via index funds with low management fee overhead is a solid, profitable investment strategy.

"But that just makes it more important that you understand why you've chosen to hold onto this stock for so long. And I don't think speculation about the future is a good basis for that decision."

MSFT has underperformed over the past 5 and 10 year horizons. Past performance is not a guarantee of future results, but I have found it to be a worthwhile indicator to pay attention to.

I was a portfolio manager for about 3 years (before I decided to jump ship and try a startup). When building a portfolio for someone, one of the most important questions concerns the time horizon of the investment. A portfolio's risk profile should be appropriate for the investor. The only way to determine this is to look at the past performance, past volatility, and future prospects of any potential portfolio asset.

In the long-term everything is uncertain - I agree with you on this. However, where we disagree is that you seem to believe that all future events have an equivalent uncertainty, but this is demonstrably false.

There is a implicit probability associated with all future events, and these probabilities, in the aggregate, will impact today's share price. Some events are more probable than others. For a subtle demonstration of this, you could easily look at the performance of some of the larger pharmaceutical companies. As they get closer and closer to the expiration of some of their key money-making patents the volatility of the companies notably increases.

There is a considerable amount of truth to what you are saying, but I would, personally, hesitate to invest in an individual company without incorporating some type of business risk analysis into my decision.

Edit: Minor grammatical flaws. I apologize for any that remain, this was typed in a hurry.

It's a cash cow. The bulk of its income comes from Windows and Office, with most of the rest coming from servers and enterprise services.

The issue is that it is being managed like it is a change-driving company investing huge sums in new markets that generate slender revenues where they don't generate losses. Paying $8.5 billion, around 4% of its market capitalisation, for Skype is not likely to change the revenue it gets from its core businesses.

If it wasn't so big, I would expect it to be a private equity target. But the pargest PE deals have been around $40 billion, about 20% of Microsoft's cap.