It looks like Microsoft (MSFT 0.05%) was the unlucky recipient of a downgrade from Morgan Stanley on fears that the PC market is set to deteriorate at an alarming 10% rate year over year. On the surface, these fears seem perfectly reasonable. The computing continuum is expanding, and tablets, by nature of their low prices and extreme portability, are on track to become the most ubiquitous form factor of the "PC" -- which one could argue encompasses tablets, notebooks, and desktops.

While Morgan Stanley is certainly correct that the PC market is unhealthy -- a negative for Microsoft -- the picture starts to look better when Microsoft's consumer efforts are viewed from the perspective of the entire computing continuum.

Microsoft's tablet push could offset PC declines
It would be disingenuous to claim that Microsoft has a particularly large part of the tablet market -- it's at about 5%, with only a small fraction of that share belonging to Microsoft's Surface RT tablets. However, the ASUS Transformer Book T100 -- a full Windows 8.1 device with an Intel Atom -- is now the No. 1 best-selling notebook on, and it's No. 6 in tablets. It's tough to ignore the clear signs that Microsoft is set to gain share as Microsoft/Intel push a convertible strategy.

That being said, it's not all about the convertibles and large tablets. The market is finally seeing some compelling 8-inch full Windows 8.1 designs roll out from the likes of Dell, Lenovo, and Acer. These are reasonably priced, but are probably at the higher end of what the market is willing to pay as they start at $299.

However, many users -- particularly in a corporate environment -- probably enjoy some of the niceties that they get with full Windows 8.1 even on a small tablet. These include wide peripheral support, Office 2013 Home and Student, and ease of integration within a corporate IT infrastructure.

That may be enough to justify this more premium pricing -- no doubt due to the non-zero price of a Windows 8.1 license and the Office 2013 license. This isn't going to get Microsoft high-double-digit market share, but it could more than offset the PC decline given the size of the tablet market and the fact that the PC decline is at the low end of the market anyway.

Microsoft is about much more than Windows
The other elephant in the room with respect to this downgrade is that Microsoft's business just isn't all that dependent on Windows. Sure, it's about 25% of the company's revenue, but the rest of Microsoft's business, which includes server and tools, Office, and devices, can still drive robust growth for many years to come. While free alternatives to Office certainly exist, the old saying, "you get what you pay for" rings true here. OpenOffice just isn't Office 2013. Microsoft is also in a strong position with its devices segment, which will soon integrate Nokia as well as benefit from the console refresh. Server and tools is also a pretty nice bright spot for the company.

The stock is just dirt cheap
Finally, it's difficult to ignore that Microsoft is just dirt cheap. At just 12.7 times calendar-year 2014 earnings estimates, and with a net cash position of $63.3 billion -- a gigantic cushion -- it's really tough to see a whole lot of downside to the shares at these levels, particularly as Microsoft's board recently approved a rather monstrous $40 billion buyback program. Why would any investor try to fight the very serious buying pressure that Microsoft's buyback program could put on the stock?

Consider that Google (GOOGL -0.54%), a hotter growth story thanks to its search revenues as well as the continued dominance of its Android OS in the mobile space, trades at a whopping 29 times trailing-12-month earnings. It sports a market capitalization of $344 billion -- a fair bit ahead of Microsoft's $310 billion market capitalization, despite the fact that, again, Microsoft makes plenty more money. Microsoft may not be as hot as Google, but it sure seems like a much better value. 

Foolish bottom line
Microsoft has performed extremely well so far in 2013, no doubt fueled by continued strong revenue growth for a company of this size. While the shares may be due for a breather, they would look incredibly attractive on a meaningful pullback. Whether investors will be lucky enough to actually get such a pullback is unclear, particularly as the Morgan Stanley downgrade seemed to have very little effect on the share price in the Nov. 18 session.