(FORTUNE Magazine) – Pick up a newspaper or magazine lately, and you'd think the roof was about to fall in at Microsoft. Revenue growth, once routinely more than 30%, is barely into double digits. Vista, its new operating system, formerly called Longhorn, is a year behind schedule and won't be out until late 2006. Its efforts to beat Google in search and Apple in music have yet to bear fruit. Many of its new businesses, like Xbox, are not making money yet. In Asia piracy and the free Linux operating system have forced it to do what was once unheard of--cut prices. Some critics say that Microsoft is becoming the IBM of its generation--a hugely successful company that is getting itself in trouble by allowing years of success to go to its head.

Investors have become so pessimistic about Microsoft's prospects that they value it at 17 times next year's estimated earnings. That's less than old-economy stocks like Boeing, GM, and Procter & Gamble, and only slightly more than the market as a whole. "It's a screaming buy," says Charles DiBona, an analyst at Bernstein Research who has been upbeat on Microsoft for 15 months. The stock recently traded at $26, but DiBona figures that Microsoft's $22 billion desktop business alone is worth $27 a share. Add its $38 billion in cash--$4.40 a share--and the rest of the company, DiBona, says, and you get a value of at least $37 a share. And that doesn't count the fact that in the next 15 months Microsoft will release more new products, including Vista, Office 12, and Xbox 360, than it has in five years.

How could Microsoft, the ultimate growth stock, whose share price rose from 62 cents (adjusted for splits) to nearly $59 during the 1990s--a compound annual return of 58%--become underappreciated? Beset by the fundamental issues mentioned above, it fell through the cracks of the investment community, DiBona says. Go-go investors didn't want it once its growth rate slowed. Those looking for dividend income weren't that impressed with its sub-2% yield. And it was too expensive for value investors, who rarely put money into technology stocks anyway.

That may be changing. DiBona says that more than two dozen value investors--money managers who together control roughly $100 billion--have asked him about Microsoft since June. Richard Pzena is one value investor who has already taken the plunge. During the first half of this year he bought nearly $300 million worth at $25 a share, about 2% of his $15 billion under management. "It was the last stock I thought I would own," he says. "Such a high-quality franchise is rarely cheap enough to interest investors like us."

Pzena says he understands all the issues facing the company, but he believes other investors have weighted them too heavily. He thinks Microsoft has an enduring and largely unassailable franchise with Windows and Office. "Value guys are historically afraid of tech," he says. "But to me Microsoft is not really a technology company anymore as much as a modern industrial franchise, like a circuit breaker company."

And he says he believes that chairman Bill Gates and CEO Steve Ballmer keenly understand the problems that need to be addressed. Certainly recent events suggest they are trying. Last month they reorganized Microsoft's seven business units into three divisions, in hopes of making it easier for the company's 61,000 employees to work together. Microsoft is also changing the way it writes software so that it can be delivered faster and in smaller pieces.

Should you follow Pzena's lead? He's certainly a good stock picker. Since he started his firm a decade ago, he's compiled compound annual returns of 17%, vs. 10% for the S&P 500. He's done it with big bets on companies like Aetna, Boeing, Computer Associates, and Hewlett-Packard. As for Microsoft, he says that it ought to be a $33 stock, based on these assumptions: that revenues will grow at 8% a year through the end of the decade (half the recent rate), that the company buys back about 3% of its stock a year (a bit more than Microsoft has committed to so far), and that it boosts operating margins to about 43%, from roughly 41% today. He believes Microsoft will get those higher margins from its fast-growing server software business and from either bringing new businesses like Xbox to profitability or shutting them down.

Sure, Microsoft probably will never again see the heady growth and media buzz it had in the 1990s. Google seems to have taken that mantle for now. But there are good companies and good stocks, and they are not always the same. With Google trading at about $300 a share, or 40 times next year's earnings, and Microsoft trading at less than half that valuation, which would you rather own?