As with people, the most dangerous time in a successful company's life happens during its adolescence. As a business matures, its growth naturally slows, it finds itself throwing off more cash than it can prudently deploy, and it arrives at a natural crossroads.

At this crossroads, a company's future depends a lot on how it answers this question: "Should I acknowledge my maturing status gracefully and begin to act like a large company, or should I try to hang on to my youthful vigor through aggressive tactics like plastic surgery and botox?" If a company makes the wrong choice, it can start on the slippery slope toward becoming the next Krispy Kreme Doughnuts (NYSE:KKD), a decent-sized firm largely destroyed by its quest for infinite growth.

Fortunately for investors, software titan Microsoft (NASDAQ:MSFT) seems to be handling that transition from youth to adulthood well. Upon realizing that its rapid ascent was behind it, the business significantly cut back its dilutive employee stock options and replaced them with actual shares of stock. This move much better aligns its employees' interests with those of its outside shareholders -- a sign of an intelligently maturing company. Additionally, upon acknowledging its maturity, Microsoft instituted a regular dividend (which it recently hiked) and handed out over $30 billion in a special, one-time payment. Those payments put Microsoft firmly on the map of mature corporate stalwarts, as they illustrate that the company wants to reward its owners while still allowing them to keep their stake in the business.

Contrast Microsoft's successful entry into adulthood with the veritable tantrum thrown by fellow tech titan Cisco Systems (NASDAQ:CSCO). Cisco not only refuses to pay a dividend, but it continues to dilute its shares through hyperaggressive options grants. Consider, for instance, this recent authorization for 350,000,000 new shares, or about 5.6% of the total outstanding shares as of last October. To add insult to injury, by buying back its overpriced shares to hide the damage, Cisco is actively destroying shareholder wealth. Look no further than its shrinking shareholder equity to see what happens when a large firm simply refuses to grow up.

The 'tween years
Of course, growing up is often tumultuous. The aggressive funds like Franklin Aggressive Growth (FUND:FGRAX) no longer want to hold huge positions in a lumbering giant. On the other hand, although its dividend is moving in the right direction, a 1.3% yield is not enough to excite income-oriented funds like the American CenturyEquity Income (FUND:TWEIX) fund into taking huge stakes. With major fund classes largely rejecting its shares, Microsoft's stock has gone nowhere for years, despite continuing to turn in solid business results.

Adding to the pressure on its shares is the expected intensifying competition from the likes of search pioneer Google (NASDAQ:GOOG). With its move from the Internet into PC software with things like the Google Pack, rumors have been flying. Chief among them is that Google might soon be going after Microsoft's heart and soul -- the Windows operating system.

Such worries helped keep Microsoft's shares low. That made it a prime target for Motley Fool Inside Value's Philip Durell, who picked it back in October, back near its recent lows. No longer wanted by growth funds, still eschewed by income funds, and facing another round of as-of-yet unbeaten competition, Microsoft's shares were just too inexpensive to ignore. Already a market-beating pick for the service, it shows just how much an investor can accomplish by finding strong companies trading on the cheap.

Defense wins ball games
If anything, Microsoft is a master of coming from behind, protecting its turf, and applying ideas appropriated elsewhere. Back in the day when Apple (NASDAQ:AAPL) was primarily known as a computer company, its head start on a graphical computer interface looked nearly insurmountable. We all know how that battle ended. With its upcoming next generation Windows and Office packages, Microsoft will deliver most of the new features its users have been demanding and seeing from competitors. Just like before, Microsoft's "good enough" solutions that work with minimal upgrade pains will keep its customers sufficiently satisfied to stick around. It's a strategy that has worked in the past and looks just as likely to succeed today.

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At the time of publication, Fool contributor and Inside Value team member Chuck Saletta owned shares of Microsoft. The Fool has a disclosure policy.