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Microsoft Still Has a Lot to Prove

NEW YORK ( TheStreet) -- In the eyes of many investors, software giant Microsoft (MSFT - Get Report) has been a disappointment. The company just hasn't been showing growth in sufficient quantities.

But that doesn't mean the company lacks value. While Microsoft may fail to register on the scale of sex appeal, today's version of the company is more about steady streams of cash flow, which present solid reward potential for minimal risk. On that basis alone the stock is worth buying.

However, its recent earnings report did little to inspire confidence for a market already packed with pessimism.

In the company's fiscal year 2013 first quarter, Microsoft disappointed the Street by reporting net income of $4.47 billion, or 53 cents per share, on revenue of $16.01 billion. The company missed both top- and bottom-line estimates of $18.11 billion and 65 cents per share, respectively. The drop of 8% in revenue ended its streak of revenue growth, which spanned four quarters, while EPS also declined by 22%.

As disappointing as these numbers were, they could have been much worse.

Likewise, investors have to remember Microsoft is one quarter removed from having reported its first loss ($5.11 billion) as a public company in one quarter.

Nonetheless, for a company with much to prove, this wasn't the start investors were expecting, especially with the company being so close to its launch of Windows 8 and its Surface tablet -- of which, Steve Ballmer, the company's CEO, said the following:

"The launch of Windows 8 is the beginning of a new era at Microsoft. Investments we've made over a number of years are now coming together to create a future of exceptional devices and services, with tremendous opportunity for our customers, developers, and partners."

The market hopes the launch proves to be a tremendous opportunity for investors as well. Microsoft has found it especially challenging to convince investors it can compete effectively against Apple (AAPL) and Google (GOOG), both of which have, or are in the process of releasing, their own products. With Apple's mini iPad rumored to be at a price point of $250 to $350, where it might significantly undercut Surface, Microsoft may find it difficult for Surface to have the level of impact that it expects.

What's more, Amazon's (AMZN) new Kindle Fire continues to be a top seller on the market at an attractive $199 price point. This only increases the pressure on Microsoft for Surface to be more than advertised. Likewise, this makes the success of Windows 8 equally pressure-packed (if not) burdensome to Microsoft's hopes.
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