Is Microsoft Cheap?

I found a good article from Barron's that speaks to Microsoft's seemingly cheap shares.

http://online.barrons.com/article/SB121158281856318635.html?mod=googlenews_barrons

Among the reasons Microsoft might not be undervalued are the following:

• A deal with Yahoo! could be costly in dollar terms (in the $40-$50 billion range)
  
• A deal with Yahoo! could face regulatory scrutiny
  
• Full integration of the Microsoft and Yahoo! could take a long time, effectively ceding more market share to Google in the meantime
• Continued scrutiny of Microsoft's latest Vista OS puts into question the company's earnings projections for the next few years

With that said, Microsoft's recent down-tick is probably a tad overblown. Microsoft still has a monopoly over the desktop and isn't going anywhere anytime soon. The reason for the recent weakness is not because of a shift in long-term fundamentals but rather a signaling of Microsoft's weakness on the internet, which should have been apparent to investors long ago.

Anyway, Microsoft shares will likely tread water before more light is shed on the "Yacrosoft" ordeal. But if Microsoft makes a bold statement that affirms its ability to find its own web strategy without Yahoo!, investors will likely reward Microsoft shares greatly. The only way I see more downside in the stock is if Microsoft buys Yahoo! outright for anything more than it's initial $31-per-share offering.