He noted that Microsoft has been "growing their revenues at 9 or 10 percent for 10 years, growing their earnings at a compound rate of about 10 percent for 10 years. The problem is the multiple collapsed over that 10-year period."
But Smith said the firm has worked on changing the ratio:
"They've really gotten aggressive on expenses over the past 12, 15 months and I think that's going to make a difference in terms of earnings."
He also pointed to positive signs for Microsoft's Kinect gaming technology and notes its XBox has been doing well "all along." And Smith believes Microsoft's cloud computing business is going to show growth "for three to five years."
"Two words to describe Cisco: 'dominant and cheap,'" Draughn declared. But "right now, Cisco's stock price is the byproduct of some negative short-term sentiment," he believes.
Draughn pointed to some "absolute numbers" — including revenue, inventory turnover and profitability — as showing that "Cisco still maintains its moat around its castle compared to competitors."
"Networking needs continue to grow worldwide [and] Cisco has a dominant market share in the broadband connection space."
"Even more significant" is Cisco's P/E ratio and strong track record of cash accumulation, he said.
"In this dogfight, Cisco is going to emerge next year" as the victor."
Watch the interview to see Draughn's 2010 price target for Cisco.
CNBC Data Pages:
2010's Other 3 Top Dow Dogs:
Bank of America
Disclosure information was not available for Smith, Draughan or their companies.