Updated from July 20

Sun Microsystems ( SUNW) shares were down Wednesday amid mixed reactions to its fiscal fourth-quarter report. After the close Tuesday, Sun delivered earnings per share a penny greater than expectations on stronger-than-expected revenue.

Still, the stock was recently off 8 cents, or 2%, to $4.04.

In a note underscoring Wall Street's standoff interest in Sun's latest turnaround bid, First Albany's Joel Wagonfeld said June results "suggest Sun's new pricing and go-to-market strategies have begun to drive footprint and revenue, potentially setting the stage for more sustainable -- and profitable -- growth. However, the company's business model is still evolving, its pricing strategies remain unproven and operating leverage remains elusive."

Though guidance was limited, management outlined a $500 million reduction in operating expenses for fiscal year 2005, which just got under way. In light of those predictions, Wagonfeld increased his fiscal year 2005 estimate to a profit of 3 cents, up from a loss of 2 cents, on revenue of $11.9 billion, up from $11.2 billion.

"Valuation looks compelling on many metrics, and net cash of $1.86 per share provides downside protection, resulting in an improving risk/reward," wrote Wagonfeld. "We could see the shares trading somewhat higher, but we think they will likely remain range-bound as investors wait for evidence that Sun can successfully drive revenue growth, extend share in new markets, take out costs and increase operating leverage -- all while defending its core customer base and business segments." (He's maintaining a neutral rating on the stock; First Albany hasn't done banking for Sun.)

Under generally accepted accounting principles, Sun reported a "preliminary" profit of $795 million, or 24 cents a share, in the fourth quarter, which ended June 30. But that includes $1.6 billion of other income and $350 million in deferred other income related to the settlement of its suit against Microsoft ( MSFT). Sun said it has sought confirmation of certain accounting details related to the settlement from the Securities and Exchange Commission, and that financial results are pending final resolution of these matters.

A year earlier, Sun posted a net loss of $1.039 billion, or 32 cents a share, in the same period a year earlier.

Excluding charges and the Microsoft settlement, Sun reported a pro forma net loss of $169 million, or 5 cents a share. That was a penny higher than the consensus estimate gathered by Thomson First Call.

Revenue grew to $3.11 billion, 4.3% higher than $2.982 billion a year earlier. That exceeded analyst estimates of $2.886 billion in revenue.

Sun, a former highflying maker of powerful server computers, has yet to recover from the implosion of the dot-com boom, and has lost market share to companies selling cheaper servers powered by standard Intel ( INTC) processors running Microsoft Windows.

Sun once again declined to give guidance for the quarter under way. Sun broke ranks with its rivals and stopped giving guidance in the fall of 2002; it has never resumed the practice, though it has lately talked up efforts to get its business back on track.

On a post-close conference call, Goldman Sachs analyst Laura Conigliaro noted in a question to management that Sun revenue typically falls 15% to 20% in the quarter under way, but executives declined to comment on whether that pattern was likely to be reprised this quarter.

Sun also outlined plans to return to profitability and revenue growth in fiscal year 2005, which just got under way.

The company delivered a loss of $376 million for fiscal year 2004 and sales actually shrank 2.2% to $11.185 billion, bucking the growth trend seen by other big-name server and storage outfits.

Wall Street agrees that Sun can grow in the upcoming year, but just barely: The current consensus estimate assumes sales of $11.208 billion for the year ending in June 2005.

Meanwhile, analysts are betting Sun can deliver a mere penny of earnings for all of fiscal year 2005, although estimates range from a loss of 10 cents per share to a profit of 15 cents.