NEW YORK (CNN/Money) - Microsoft's net rose 24 percent on strong software sales and healthy demand for PCs and servers, but weaker-than-expected guidance for the current quarter sent the shares down in after hours trading.

The company reported revenue of $9.74 billion for its fiscal first quarter of 2006, a 6 percent increase over revenue of $9.19 billion for the same quarter last year and just shy of Wall Street expectations of $9.78 billion, according to Thomson First Call estimates. Microsoft's (Research) shares dipped over two percent in after-hours trading.

Microsoft posted net income of $3.14 billion, or $0.29 per share, including a $0.02 per share charge for a legal settlement with RealNetworks. Excluding the charge, the company beat Wall Street estimates by a penny. The company posted net income of $2.53 billion in the year-ago quarter, or $0.23 per share, after an adjustment for a legal settlement with Nortel.

Brent Williams, an analyst with Keybanc Capital Markets, said that while the company lowered guidance for the current quarter, investors and analysts shouldn't take a short term view. He said instead, they should focus on the fact that Microsoft is on the cusp of releasing several major new products, including the Xbox 360 on Nov. 22 and Vista, the first major Windows operating system upgrade since XP, later next year.

"This is the gateway to a major product cycle," he said.

"Overall I'd categorize the number as generally in line," said Sunil Reddy, senior portfolio manager at Cincinnati-based Fifth Third Asset Management, whose firm owns shares of Microsoft. "The guidance was slightly off, but it's nothing to get too alarmed or too excited about."

The company also issued sales guidance for the current quarter that fell short of Wall Street estimates. For the current quarter, the company is expecting revenue in the range of $11.9 billion to $12 billion, while Wall Street is expecting $12.29 billion.

The company expects earnings per share of $0.32 to $0.33 for this quarter, shy of Wall Street expectations of $0.35 a share.

Microsoft's Client division, which includes its Windows operating system, recorded revenues of $3.19 billion, while its Information Worker business, which includes the Microsoft Office software, recorded revenues of $2.68 billion disappointing Microsoft shareholder Ben Halliburton, chief investment officer with Summit, N.J.-based Tradition Capital Management.

He said that given that PC shipments for the quarter rose 17 percent, according to data from research firm IDC, he would have expected higher revenues from those divisions.

"Windows ships out on almost every unit, so you would have thought they'd have seen more upside," he said. "I'm a little disappointed that they didn't get flow through from strong PC sales."

Investors and analysts have long complained about Microsoft's stagnant share price; the shares have been stuck for more than three years, trading in a 52-week range of $23.82 to $30.20. As part of a plan to perk the stock price, the company announced plans to accelerate its share buyback program.

"Our goal is to execute the $19 billion remaining under our buy-back plan twice as quickly, finishing no later than December 2006, said Chris Liddell, chief financial officer at Microsoft, in a statement.

Some shareholders have said they'd rather see the company issue a bigger dividend.

"My preference would be to see a dramatic increase in the dividend; I think they'd get more bang for their buck," said Halliburton. "They clearly have the financial capability to triple it; I think they could attract more investors and get a higher stock price more readily."

But Richard Williams, technology analyst at Garban Institutional Equities, remains unconvinced that the share buy back accleration is going to have a significant effect on Microsoft's stock price. He is more bearish on Microsoft than other Wall Street analysts and has a "sell" rating on the stock.

"The difference between Microsoft's price to earnings ratio for this year and the S&P 500's is a lot," he said. "The S&P's is 16; Microsoft's is 19.8 – that's a 27 percent premium to the S&P, yet growth is substantially below that of the S&P. Microsoft is not growing fast enough to justify the stock price."

More optimistic investors and analysts are hoping that the launch of the new products, which also includes updates next year to its Microsoft Office software and SQL server software lines, will jolt the share price. Garban's Williams pointed out that Xbox will initally be a loss-leader for the company, and that Vista is not expected to come out until September of next year, meaning the company won't book revenues for it for another year.

The company's MSN division posted disappointing numbers in its MSN division, which posted revenues of $564 million, almost flat from the $559 million recorded in the year-ago quarter. The company faces stiff competition from competitors Google and Yahoo!, which have both posted growth in ad revenues.

"Our search advertising revenue has not been as strong as we'd like," admitted chief financial officer Chris Liddell in a conference call to investors.

Microsoft reported double-digit growth in its server division and 15 percent revenue growth for SQL, one of its server software products. The company also reported strong growth in its Mobile and Embedded Devices unit. Revenues for that division came in 50 percent higher than the year-ago quarter due to strong demand for Windows Mobile software, which is bundled on handheld computing devices.

For the full fiscal year 2006, Microsoft raised its earnings guidance slightly to earnings per share of $1.26 to $1.30, including $0.02 for the first quarter settlement charge. The company is expecting revenues in the range of $43.7 billion to $44.5 billion. Wall Street is expecting earnings per share of $1.31 and revenues of $44.2 billion for the fiscal year 2006.

Microsoft shares ended Thursday's session at $24.85.

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Garban's Williams and Keybanc's Williams do not own shares of Microsoft, and their firms do not have banking ties to the company. Keybanc's parent company, McDonald Investments, may do banking business with Microsoft.