SAN FRANCISCO - On a tumultuous day for stocks, VMware ( VMW) was feeling more than its share of pain.

The virtualization software supplier dropped $3.69, or 7.4%, to $46.09 after a sell-side analyst issued a note lowering the one-year price target. By comparison the iShares S&P GSTI Software Index ( IGV) was off 2.5%, while the Nasdaq was down 1.9%.

Baird analyst Jayson Noland lowered his price target on Palo Alto, Calif.-based VMware to $50, from $80, "to reflect multiple contractions in a more difficult macroeconomic environment."

"We continue to believe VMware's compelling growth opportunities are balanced by already large ... competitive threats," Noland wrote. The new price target is roughly 30 times 2009 earnings expectations.

The consensus 12-month price target is $62.50, according to Thomson Financial. Just over a week ago, the target was $72. The company is expected to post EPS of $1.10 in 2008 and $1.55 in 2009.

In addition to smaller, privately held competitors such as Virtual Iron, other virtualization providers posing a risk to VMware revenue include Citrix ( CTXS), which sells Xen open source software, and Microsoft ( MSFT) which will add virtualization capability to its Windows Server software later this year.

The company, which is majority owned by EMC ( EMC) has projected 50% top line growth for 2008, which would give it revenue of nearly $2 billion.

Shares of EMC were recently down 44 cents, or 3%, to $14.35 on news that its buyout target Iomega ( IOM) has agreed to negotiate following EMC's revised offer of $3.75 a share. Iomega was recently up 9% to $3.56.

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