Goldman Sachs added Microsoft (MSFT) to its conviction buy list this morning. According to Barron’s, analyst Sarah Friar cited a mix of revenue drivers, cost controls, and large cash balances as opportunities for more upside surprises.

Friar said Microsoft's new products -- including Windows 7, Bing, Windows Service 2008 R2, Azure Cloud software, and the new Xbox 360 -- brought about “renewed innovation beyond anything we have seen in multiple years.”

In her report, Friar did warn that the June quarter could be difficult, however, given that IT spending fell, but she claims that investors can now expect growth in 2010. For the fiscal year ending in June, she expects the company to earn $1.72 a share, down from her previous estimate of $1.75 a share. For fiscal year 2010, she sees Microsoft earning $1.85 a share, down from her previous estimate of $1.95, but still slightly above consensus estimates.

Shares of Microsoft were up 3%, to $24.24, late Friday afternoon. The stock has gained 24% since May 26.

From the Bull Pen: The “trade” could be over for Microsoft, but for the passive investor, one can start an initial position here and be ready to add on a pullback (possibly to its 20 DMA currently at $22).

From the Bear Cave: Professor Mike Paulenoff mentioned the positive action in Microsoft as well as the implications for the Q’s (QQQQ) on the Buzz today. But if QQQQ falls below this week’s pivot low at $35.24, be prepared for more downside action.

Time for Toddstock! Be safe, and have a great weekend Minyans!