PALO ALTO -- VMware stock dropped more than 20 percent in Tuesday trading after the company announced a restructuring and 2013 forecast that disappointed investors and analysts.

The virtualization software company dropped as low as $76.33 Tuesday -- a 22.4 percent dip from Monday's closing price, the largest drop in the company's share price since 2008 and a new 52-week low. Shares closed at $77.14, a loss of $21.18, or 21.5 percent.

VMware released its quarterly and annual earnings Monday, which showed record revenues for the full year and final three months of 2012, but also said the company would lay off 900 workers in a restructuring expected to continue through 2013, when VMware's expected revenues fell short of analysts' forecasts.

VMware's most recent annual filing with federal regulatory officials said it had "over 11,000" employees worldwide, but The Associated Press said the company had 13,200 at the end of last year. That would mean the 900 lost jobs would represent 7 percent to 8 percent of its global workforce.

A company spokesman, when asked Monday, would not elaborate on where the cuts would happen.

The company's head count will still increase by about 1,000 this year despite the layoffs as the company reorganizes its businesses, CEO Pat Gelsinger said in Monday's conference call.


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VMware's guidance for 2013 was the bigger sticking point for most analysts: The company said its first quarter sales should range from $1.17 billion to $1.19 billion, and its 2013 total revenue should be $5.23 billion to $5.35 billion. Analysts had expected $1.25 billion for the first quarter and $5.42 billion for the year.

Sterne Agee analysts Alex Kurtz and Amelia Harris downgraded VMware to a "Neutral" rating with an $86 price target, noting that the reorganization could be a distraction.

"The company, which had acquired a number of smaller private assets over the last three years, now requires a reset of personnel that could further lead to execution challenges in the short term," the analysts wrote.

S&P Capital IQ analyst Jim Yin agreed, cutting his rating from "Buy" to "Hold" and dropping his price target -- the price at which an analyst believes an investor should sell stock for maximum return -- $27 a share to $94 a share.

"Some of VMware's new initiatives have not achieved the success the company had hoped for, as it plans to scale back investment in some business areas," Yin wrote.

Not all analysts are down on VMware after Monday's report, however. Global Equities Research analyst Trip Chowdhry, who has a $100 price target on the stock, wrote that VMware will hit his projections for 2013 and 2014, and believes investors should jump while the price is depressed.

"We think investors with long-term investing horizon should buy VMware on weakness," he wrote.

VMware's parent company, EMC, released its earnings Tuesday, and its forecasts also came in slightly below analysts' projections; EMC shares slid 4.1 percent.

Staff writer Steve Johnson contributed to this report. Contact Jeremy C. Owens at 408-920-5876; follow him at Twitter.com/mercbizbreak.