Microsoft Corporation’s financial result is not bad as expected, according to analysts, who stated that the company’s stock is cheap, but it needs to accelerate its earnings growth.

Microsoft Corporation (NASDAQ:MSFT) reported its financial result for the second quarter of FY13 with a revenue of $21.46 billion. The software giant’s revenue increased by 2.7 percent due to the strong performance of Windows division, but its net income declined from $6.62 billion or $0.78 per diluted share during the same period a year ago to $6.38 billion or $0.76 earning per diluted share.

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According to Microsoft Corporation, the sales of its Windows division went up by 24 percent to $5.88 billion, while its Server & Tools business generated $5.19 billion revenue, up by 19 percent compared with its result in the same quarter last year.

Microsoft CEO, Steve Ballmer said, “Our big, bold ambition to re-imagine Windows as well as launch Surface and Windows Phone 8 have sparked growing enthusiasm with our customers and unprecedented opportunity and creativity with our partners and developers.”

Ballmer is confident that Microsoft Corporation (NASDAQ:MSFT)’s new Windows devices and new Office will continue to drive growth for the Windows ecosystem.

The performance of Microsoft’s Business division declined by 10 percent to $5.69 billion, and the revenue of its Entertainment and Devices division dropped by 11 percent to $3.77 billion. During the period, Microsoft sold 5.9 million Xbox consoles, a 28 percent drop; and its Skype business surged by 59 percent in call minutes. Microsoft’s Online Services division posted $869 million revenue, an 11 percent increase compared from last year.

The company maintained its operating expense guidance of $30.3 billion to $30.9 billion.

Analysts at Nomura Equity Research said Microsoft’s financial result was not bad as they had projected. According to them, the search engine giant’s revenue increased by 5.3 percent on a PC unit decline of 6 percent. Their math excluded the deferral of some video game, Office 2013, and the previously deferred revenues of Windows 8 into the next quarter.

The analysts said Microsoft hit an obstacle with the slow adoption of Windows 8, while the PC industry is eager to transform into a tablet/hybrid tablet/Ultrabook industry. They wrote, “This is an awkward pivot point as much of the consumer market adopts iPads or low cost Android tablets that threaten to commoditize the consumer space, particularly in price sensitive emerging markets. An upgrade cycle with a fighting chance to hold onto prosumers and enterprise users who have an attachment to Office productivity will need to surface in the second half in order for the stock to work.”

The analysts believe Microsoft Corporation (NASDAQ:MSFT)’s stock is attractive as a value stock, but it needs to show accelerating growth to move a lot higher. According to them, the risk/reward is favorable at 6.8x CY 13E earnings excluding $6.23 in net cash per share (tax affected for repatriation), and 6.8x EV to uFCF, near valuation levels and badly out of favor with investors. They recommended a buy rating for the shares of Microsoft and expected to see positive signs in the middle of the year.

On the other hand, analyst at Morgan Stanley (NYSE:MS) commented that they like Microsoft’s product cycle, and  think the stock is “far too cheap with a FCF yield of 16%+, but they prefer other companies until they see more touch devices and stability in PCs/convertible markets, evidence of leverage though the cycle, and re-acceleration of earnings growth.