VMWare (VMW) stock got pummeled Tuesday, losing a third of its value after the software company posted soft fourth-quarter revenue and offered a 2008 outlook that disappointed Wall Street. Fears that the company’s stellar growth will slow also punished parent EMC (EMC), whose shares dropped 9% even after the networking storage company posted stronger-than-expected fourth-quarter numbers. The VMWare shortfall got analysts to thinking about what might happen to the company’s volatile shares even before Tuesday’s bloodbath got under way.

In a note late Monday, Robert W. Baird analyst Daniel Renouard cut his price target to $80 from $110, while retaining a neutral rating. Nothing new on that front: He had that same rating back when he began covering the stock back in August - when he dubbed VMWare fairly valued at $60. Since then, VMWare has spiked to $125, calling the fairly valued view into some question, before plunging on Tuesday back to $56.

So what’s Renouard’s call here? Everyone remain on the sidelines, please. “Although we remain big believers in VMware’s growth prospects longer term,” Renouard wrote Monday night, “we believe management’s expectations of license revenue growth deceleration warrants a wait-and-see approach on the stock given macro uncertainty and potential pricing pressure.” Waiting and seeing has worked so well in the past, after all.

VMWare (VMW) plunged 24% in late trading Monday after the software company missed Wall Street’s fourth-quarter revenue estimate. The Palo Alto, Calif., spinoff of EMC (EMC) made $78 million, or 19 cents a share, for the quarter ended Dec. 31, up from the year-ago $31 million, or 9 cents a share. Excluding certain costs, earnings were 26 cents a share - 2 cents ahead of the analyst consensus estimate. But sales, despite rising 80% from a year ago to $412 million, missed the $417 million analyst estimate.

Investors fled the stock, sending VMWare shares tumbling $19 to $64 and parent EMC sliding 10% to $15 and change. That was somewhat predictable, given that VMWare shares rose fourfold in just over two months after their August initial public offering to hit $125 back on Halloween. And though the stock’s momentum has clearly ebbed, Fortune’s Adam Lashinsky noted at the time of the IPO that unlike some short-lived tech faves, VMWare has a business that should continue to bring in profits for some time. “VMware actually solves a problem that matters to big technology buyers,” Lashinsky wrote on his Go West blog. “Its virtualization approach allows companies with massive server farms to more efficiently use their server capacity.” Sounds like a good idea - as long as you don’t bet the farm on the stock.