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Microsoft Is Cool. Maybe Too Cool.

This will be an odd sentence to read for people who remember the debacles of Microsoft's Zune and Windows Vista: Investors have grown too infatuated with Microsoft.

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Yes, Microsoft. The longtime king of the bumbling tech nerds is now ... the cool kid in school. Its chief executive wears fashionable $500 sneakers and quotes Urdu poetry. For the first time in ages, Microsoft is on the cutting edge in personal computers, a range of software for businesses, video games and futuristic technology that superimposes virtual images onto the real world. The company's stock price has nearly doubled since Steve Ballmer stepped down as CEO in early 2014.

The 42-year-old company is one of the few original technology empires to cross the chasm from one generation to the next. But the justifiable enthusiasm about Microsoft's promise has gotten ahead of reality.

People who buy Microsoft's stock today are paying 21 times the company's estimated earnings for the next year, after some adjustments including accounting for its cash and debt, according to Bloomberg data. That means stock buyers are essentially paying upfront for the next two decades of Microsoft's profits. Microsoft's longtime antagonist, Google parent company Alphabet, is a relative bargain on...