Shares of Microsoft ( MSFT) tumbled more than 11% Friday, the stock's biggest single-day loss in about five years, as investors gave a thumbs-down to the company's heavy spending plans.

In recent trading, shares were off $3 to $24.25 with more than 450 million shares trading hands, seven times average volume. Earlier, the shares set a fresh 52-week low of $24 apiece.

"This could take the wind out of the stock for several quarters, maybe a year," said Kyle Flynn, an analyst with TCW Asset Management, which has a position in Microsoft. "Everyone was focused on near-term upside."

Indeed, investors and analysts have been positively drooling over the prospects of increased sales and earnings after the launch of Vista, the new versions of Windows and a raft of other products.

Goldman Sachs analyst Rick Sherlund, for example, wrote a number of notes supporting the stock in the last year, consistently making the point that the new product cycle, seen as the company strongest in years, would lead to a breakout of Microsoft's stagnant stock.

But on Thursday, Microsoft told investors that it is going to accelerate spending by some $2 billion in fiscal 2007 -- and live with the resulting decrease in margins and earnings per share.

After the company's disappointing top-line guidance, Sherlund said, "From an investor sentiment perspective, this is clearly a discouraging development, taking away from the anticipated excitement over the strong upcoming new product cycles in calendar 2007." Goldman Sachs has an investment-banking relationship with Microsoft.

To be sure, it wasn't hard to find investors and analysts who believe Microsoft is doing what is has to do.

"Fundamentally, it is the right way to run a business," said Stein Rowe analyst Chuck Jones. "It's probably a short-term negative and a long-term positive." In the absence of more details, however, "the jury will stay out," Jones said.

Microsoft's failure to signal the strategic shift, and worse, the lack of clarity on what the company will really spend the money on, made investors very nervous, said Mike Marzolf, a portfolio manager with Thrivent Financial.

"They had no choice," he said in an interview. "They missed search; they missed music; they are in danger of losing control of the desktop."

One New York-based hedge fund manager sold his position in Microsoft about a month ago, not because he anticipated Thursday's results but because "we finally decided we might as well put our tech investments where will get more value."

Asked if the company's new direction encourages him to reconsider, he said it wouldn't. "How do investors know the heavy spending isn't just a black hole?"

Although Microsoft was vague about how it will spend the extra money, most analysts say the lion's share will go to Internet-related ventures.

"Ballmer and Gates and those guys look at Google ( GOOG) and Yahoo! ( YHOO), and say 'Why aren't we doing that?'" says Matt Rosoff, an analyst with Directions on Microsoft.

Until recently, Microsoft was unclear on the online business model, he said. "Now they are clear, and it's advertising."

Rosoff says Microsoft will pour money into its Ad Center -- a platform for paid search results -- beef up the long underfunded MSN, even build a data center in eastern Washington to handle increased Web traffic.

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