Microsoft has had a rocky relationship with investors over the years, especially the last one. If you look at the numbers over the last two years, it looks like the stock has soared with a 48.59% increase. But if you take a look at the last year alone, it’s up only 5.37%. Year to date it’s even worse at 1.79%.

To say the company has struggled to stay innovative amid competition with the likes of Apple and Google is an understatement. There’s a cartoon that’s been floating around the internet for years showing two small children representing Google Chrome and Mozilla Firefox fighting it out, while another small child representing Windows Explorer is off in the corner eating glue.

Microsoft has also failed miserably with its flagship operating system, Windows 8. While it may have been perfect for tablet users, the desktop version was a disaster, forcing Microsoft to release an updated Windows 8.1 to make it more desktop-friendly. The hybrid approach simply wasn’t working. It was so bad that Microsoft is offering free upgrades to Windows 10 later this month, something the company has never done.

And lest we forget, Microsoft’s foray into the mobile market not only didn’t pan out, it was an all-out rout.

Tuesday’s earnings report

This leads me to discuss Microsoft’s latest earnings report. On the surface, all was well. The company had an EPS of $0.62, beating the analyst estimate by $0.06 and revenue of $22.18 billion, beating the consensus by $120 million. But what really hurt was what happened on the back end.

The $0.62 earnings per share was excluding a very large write-off, $7.5 billion to be exact, in addition to a $780 million restructuring charge, both of which stemmed from the company’s troubled Nokia acquisition. The company has plenty of cash and other short-term assets on hand to easily cover the write-off, but it’s nonetheless a terrible psychic blow to the large tech firm.

But that’s not the only problem. Windows OEM revenue fell 22% during the quarter, followed by a decline in Office commercial services by 4%. We would expect this type of weakness in some of Microsoft’s ancillary products including the Windows Phone and the Surface, but not in its flagship products — that’s not a good sign.

It also doesn’t help that the company is guiding light for the next quarter, forecasting revenue of $20.7 - $21.3 billion for FQ1, well below a $22.8 billion consensus.

That doesn’t mean there aren’t areas of light for the tech firm. Cloud revenue, which has been a major focus for CEO Satya Nadella, is up 88%. Surface revenue grew 117% year over year as the Surface 3 has outperformed expectations, potentially turning it into a profitable business for the company. Xbox revenue was up 27% as well.

Buy the dip?

Microsoft is very cheap right now. With a forward P/E of 14.73, you’ll be hard pressed to find a better entry point. And while Windows revenue fell, that may be easily explained as customers waiting for the Windows 10 release. Additionally, the Nokia write-off is a one-time thing and isn’t really a big worry considering Microsoft has almost 15 times that much “in the bank.”

So is this an opportunity for bullish investors to buy the dip? Absolutely. Microsoft has had its fair share of let downs, but under Satya Nadella, the company has made some dramatic improvements. Windows 10 is looking good so far, especially because it has a fix for Windows Explorer in its Spartan browser.

Cloud is also something to focus on. With Microsoft putting more and more resources toward its cloud services, it’s showing that it’s paying off, which is great news for the company that has put so much money toward mobile and tablets in the past without much success. It’s hard to say how each of the individual business segments will pan out over the long term, but Nadella is building on a core product and its working.

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