Updated from May 13

Network Appliance ( NTAP) was continuing to slide Wednesday morning, despite the previous day's news that the company had tripled its fourth-quarter income and pushed revenue up 18%. The apparent cause: A downgrade by First Albany, which stated that the company is close to First Albany's target price.

In recent trading, the enterprise storage vendor was off $1.16, or nearly 7%, to $15.57, a downward move that began after hours on Tuesday.

The company earned $24.8 million, or 7 cents a share, compared to income of $7.8 million, or 2 cents a share, for the same period last year, according to generally accepted accounting principles. Pro forma income was also 7 cents a share, equal to Wall Street's expectations. Last year's earnings were lowered by a restructuring charge of $4.2 million related to the closure of an engineering facility.

Revenue was $241.6 million, compared to $204.9 million a year ago, and up 6% sequentially. Revenue was about $3 million more than expected by analysts polled by Thomson First Call.

First Albany analyst Mark Kelleher headlined his morning note on the company "Yet Another NTAP Killer Quarter," but downgraded NTAP to buy from strong buy.

"NTAP delivered yet another good quarter, with strong revenue and earnings growth, strong cash generation, superb handling of inventories and receivables, and positive forward guidance. The stock has, however, appreciated significantly over the last several weeks, and closed within striking distance of our 12-month $17.50 per share price target," wrote Kelleher, whose company does not have a banking relationship with Network Appliance.

"We are pleased with our performance for the quarter, particularly with our cash generation and the continued strength of the balance sheet. Our 12% increase in revenue over the last fiscal year is a direct reflection of our strong sales and operational performance," said Dan Warmenhoven, CEO of Network Appliance, in a prepared statement.

For the full fiscal year 2003, the company earned $76.5 million, or 22 cents a share, compared to GAAP income of $3 million, or a penny a share in fiscal 2002. Pro forma earnings for the year were $83.8 million, or 24 cents a share, a penny better than Wall Street expected.

Revenue was $892.1 million, up 12% year over year. Wall Street was expecting $888.8 million. Looking forward to the current quarter's results, the company expects to earn 7 cents a share (pro forma) on sales ranging from $241.6 million to $253.7 million, a sequential increase of 2% to 5%. Consensus for the first quarter of 2004 is for earnings of 7 cents on sales of $242.3 million.

There was some feeling on the Street that despite the good quarter, the company's guidance wasn't as strong as investors had hoped.

"NTAP has run up 52% this year. At that price, the market was expecting stronger earnings," said Brent Bracelin, who follows the stock for Pacific Crest Securities, which does not have a banking relationship with Network Appliance.

Bracelin said, however, that investors are probably overly worried that built-in storage features in the recently released Windows Server 2003 will prove to be formidable competition for Network Appliance. At this point, he said, the Windows product supports far fewer hard drives than NTAP products. "It's an apples to oranges comparison," he said. Microsoft ( MSFT), of course, has very deep pockets and could increase Windows' storage capabilities in the future, Bracelin added.

Network Appliance also announced Tuesday that the board of directors has approved a $150 million open-ended stock-repurchase program.