Bill Gates is super rich but his once high-flying software company is in doldrums since mid-2002 after the fall of the level of $ 35. The problem with Microsoft (MSFT) has been its inability to grow both in terms of revenues and profits superlative rates the company once enjoyed.

All companies of the size of Microsoft, with a market capitalization of $ 242 billion, growth will be a problem because of its size. But this does not mean the stock is dead. Far from it, Microsoft remains a viable long-term, software companies and is cash rich with $ 34 billion, or $ 3.28 per share in cash. This gives the stock plenty of financial flexibility to acquire or develop technologies for growth. Microsoft has just announced that it spent $ 1.1 billion in R & D units in the MSN Internet FY07. And according to the Wall Street Journal, Microsoft is exploring the possibility of taking a stake in Internet media company Yahoo (YHOO) to take on Internet advertising Behemoth Google (GOOG).

But with an estimated five-year growth rate of earnings a squallido 12%, the company has cut its work for this. Trading at 16.30x its FY07 EPS estimate of $ 1.44, the stock is not expensive, but seems to be not as a price increase of stocks.

PEG on the surface of 1.51 is not cheap, but if you cash discount of $ 3.28 per share, the estimate of PEG decreases to about 1.0, a decent value. Also, if Microsoft can improve its estimate of 12% growth rate, the target decrease further.

The fact is Microsoft at current prices is worth a look. If you want to play the stock, but not ’t want to shell out $ 2347 for a fee of 100 blocks, you may want to look at long term options, also known as jump. For example, the in-the-money January 2008 $ 22.50 Call Microsoft jumps not set to expire until 18 January 2008 now costs $ 380 a contract (100 shares).

This means that the risk of a total of $ 380 for the chance to participate in the upside potential of 100 shares of Microsoft for the next 20 months. The threshold price is $ 26.30. If Microsoft breaks $ 26.30, you should begin to make money on your jumps. Conversely, if Microsoft fails to do anything, the maximum is $ 380, on the first option to play.

Warning: The above example is for illustrative purposes only and should not be construed as a real option strategy. Due to the higher risk inherent in options, I recommend you speak with an investment professional before deciding to take any strategy involving options.

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