As Microsoft executives were busy wowing the tech world with holographic goggles that blend the virtual and physical worlds through a futuristic computing platform, investors were busy selling the stock.
The reaction makes sense. At its presentation Wednesday, Microsoft didn't say exactly when the new HoloLens technology will go on sale, and it's way too early to gauge consumer demand. But more important was another announcement from Microsoft on the same day that, at least in the short term, could damage its financials.
Long surviving off lucrative software licenses, Microsoft said that it's giving away free upgrades of its fresh Windows 10 operating system to users of the older stuff. Clearly, Microsoft recognizes that in the new world of software subscriptions and frequent updates, the practice of constantly charging customers no longer works.
"This is important to rotate customers onto the latest operating system, and serves as a lever to entice developers to build applications for the platform," wrote Colin Gillis, an analyst at BGC Partners, who has a hold rating on the stock and a $49 price target. "That said, a company whose primary business is selling software may have a near term negative impact by providing the product for free."
Of course, Microsoft will still make money from people buying new computers with Windows 10 software, but the PC market isn't growing. In mobile, where Apple and Google dominate, Microsoft's new office programs will be free.
Microsoft reports fiscal second-quarter financials Monday afternoon, and despite the stock's 1 percent sell-off on the day of the big media event, investors are generally bullish. The shares have jumped 31 percent in the past year to $47.18 at Friday's close.