Some investors are viewing Microsoft Corp. as a bargain after uncertainty about its investment strategy and development delays pushed the software giant's share price to three-year lows.

Value investors see Microsoft's latest woes as a chance to buy a cash-rich technology company boasting two dominant software franchises -- the Windows operating system and Office business software -- on the cheap.

Microsoft is definitely cheap right now, said Morningstar equity analyst Toan Tran. If you're a long-term, patient investor, you're buying one of the great businesses in the world at a very cheap price right now.

Microsoft's stock slide started after the company said last week it would sacrifice billions in profit next year to invest in new business areas.

Investors were concerned about the lack of details about the company's plans to better compete with online rivals Google Inc. and Yahoo Inc. and the potential for more delays to its Windows upgrade, Vista.

In the four trading days after Microsoft announced a profit target that disappointed investors, its share price plunged 15 percent, shaving $42 billion off the company's market value.

Based on Wednesday's closing share price of $23.17, Microsoft was trading at 16.5 times Wall Street's estimated, earnings for its fiscal year starting July 1.

On that basis, Microsoft is trading at a premium to other blue-chip stocks on the Dow Jones industrial average. But value investor Todd Lowenstein at HighMark Capital Management argues that when Microsoft's $35 billion cash reserve is factored into its share price -- which would add more than $3 per share -- any premium is erased.

The valuation is attractive and much of the reason for the hype about this product cycle is still there. The product cycle is still coming and it's not going away, said Mark Lebovitz, a portfolio manager for the Munder Internet Fund and Munder Technology Fund.

The biggest issue is where it's going to spend all this money, added Lebovitz, whose funds own more than 1 million Microsoft shares.

A FREE SHOT AT A WINDFALL

Lowenstein said the cash cushion means investors are only paying for earnings from the Windows and Office business, which account for most of Microsoft's profit, while getting a free shot to possibly benefit from a future windfall from its Xbox 360 game console or mobile phone software.

We as value investors like to get things for free and we are getting all those other businesses for free, said Lowenstein, co-portfolio manager at HighMark's Value Momentum Fund.

We will be inclined to be adding. You have very little downside here and some significant upside, he added.

In recent months, several Wall Street analysts and financial publications have predicted a rally for Microsoft shares due to optimism about Windows Vista and Office 2007 -- only to see the stock fizzle.

Through Wednesday, the stock was down 11 percent in 2006, versus gains on every major U.S. stock index. Microsoft shares are down 30 percent since the start of 2002, at the same time that the Nasdaq has risen 18 percent and the S&P 500 has gained 14 percent.

However, Microsoft shares appear to be reaching a technical bottom that suggests they are due for a recovery, analysts said.

The stock's 14-day relative strength index, an indicator of momentum that compares the magnitude of recent gains or losses, traded below 15 in the last four trading sessions. An RSI of 30 or below usually suggests that a stock is oversold.

Microsoft shares are also near levels where it has consistently found support over the last three and a half years. Technical analysts see a support range for the stock between $22.50 and $23.30.

When you have such an extensive basing pattern, the markets are conditioned to buy when it gets down to the lower portion of the pattern, said Paul Cherney, an independent technical analyst.

Microsoft shares were up 15 cents at $23.32 in morning trade on the Nasdaq on Thursday.

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