David Einhorn, president of hedge fund Greenlight Capital, owns almost 9.1 million shares of Microsoft (NASDAQ:MSFT). On Wednesday, he gave a speech at the Ira Sohn Investment Conference where hedge funds give out investment ideas to raise money for charity.

Einhorn put his money where his mouth is. He said that although he is still bullish on the company, Microsoft’s CEO Steve Ballmer is like Charlie Brown, a perpetual loser.

But that’s not really news. As I posted in June 2006, when Bill Gates retired as CEO, the stock had been dead money for the preceding five years — falling from about $57 at the end of 1999 to $22. Since then its stock has stayed dead — having risen to an unimpressive $24 — a five year annual growth rate of 1.75%.

In the past five years under Ballmer the market has lost interest in the stock — even though some measures of its financial performance have improved. For example, its return on equity has risen from 25.5% to 40.6% while its net margin has declined just slightly from 30.8% to 30%. Meanwhile, Microsoft’s price-to-earnings ratio has tumbled to about 13 from about 22 (10 years ago, it was 46).

My interpretation is that Microsoft sales growth is too slow to interest investors. In the last five years, Microsoft sales have risen at a 9.5% annual rate — far below the applications software industry growth of 14.1%. And that industry average is way below the far more compelling comparable growth rate for Apple (NASDAQ:AAPL) — 36.2% that has contributed to Apple’s 41.2% 10-year average annual stock price appreciation.

Microsoft generates plenty of cash thanks to its dominance of PC operating systems and office applications. Alas, the world is moving away from PCs and into wireless devices and social networks. And as Einhorn told the Sohn conference, Ballmer has “allowed competitors to beat Microsoft in huge areas, including search, mobile-communications software [its market share there has tumbled from 6.8% to 3.6% in the last year], tablet computing and social networking. Even worse, his response to these failures has been to pour tremendous resources into efforts to develop his way out of these holes.”

Yet Microsoft’s recent profit performance hasn’t been all that bad. In its third quarter ending April, revenue was up 13% to $16.43 billion — 1.4% above estimates — while operating income climbed 10% to $5.71 billion as net income spiked 31% to $5.2 billion. And its earnings beat Wall Street estimates.

This overall performance masked variations among the divisions. Microsoft’s online service lost money and its Windows unit suffered a 7% sales decline on weak PC demand. But its gaming division enjoyed a 60% revenue pop on the sale of 2.4 million Kinect game controllers. Its office software division enjoyed a 21% sales increase; and its server and tools division saw an 11% sales boost.

To Ballmer’s credit, the gaming division is one area where Microsoft’s investment in new businesses has paid off. I’d advise Microsoft’s board to spin that off because the rest of Microsoft’s moribund businesses are masking its exciting growth prospects.

But for the time being, investors don’t have that choice. So should you go with Einhorn on Microsoft? To think about that, we can look at its price-to-earnings-to-growth (PEG) ratio — a way to determine whether the value that the market assigns a stock is justified by the rate at which it expects the company’s earnings to grow. I think a PEG of 1.0 is a fair price, and anything below that is a bargain.

Microsoft trades at a low PEG of 1.35. Its P/E is 9.6 on earnings forecast to grow 7.1% to $1.76 in 2012. This stock is not overvalued but at that PEG ratio, it does not offer anything to get excited about – unless a 2.65% dividend yield makes your day.

If Microsoft’s board could spin off its gaming division and put Ballmer in charge — then let Steve Jobs run the rest of Microsoft, this stock would look exciting. But that will never happen — for all the media attention that Einhorn plug received, Microsoft is likely to remain dead money.

Peter Cohan has no financial interest in the securities mentioned.