Nokia's share price shed 10 percent on Monday, to 1.73 euros, its lowest point since August 1996 when it hit 1.71 euros.
At the beginning of this year, a share in the company cost 4.0 euros.
Microsoft last week gave developers a sneak peek at its Windows Phone 8 software, expected to be launched later this year, but said "it will not run on existing hardware".
"Customers will not be able to upgrade their Lumia 900s to Microsoft's Windows 8," Lauren Pluchino, a Nokia spokeswoman, told AFP on Monday.
Nokia launched the Lumia 900 earlier this year after undergoing a major restructuring, phasing out its Symbian line of smartphones in favour of a partnership with Microsoft.
The strategy has been part of the Finnish company's attempts to survive on a rapidly changing landscape, with stiff competition from RiM's Blackberry, Apple's iPhone and handsets running Google's Android platform.
But Nokia, which only recently lost the world number one ranking it had held for 14 years, announced two weeks ago massive new spending cuts and 10,000 more layoffs would be needed, in addition to the some 12,000 layoffs already announced in the past year and a half.
Observers speculated Nokia would suffer short term damage over the upgrade issue.
"Today's drop in stock price is probably a consequence of several factors, but the upgrade issue is definitely one factor," Ari Hakkarainen, an analyst at Andalys Oy, told AFP.
"The upgrade issue might have a negative impact on the company's sales," Rikka Tuominen, an analyst at Nordea, echoed.
They said the upgrade problem was symptomatic of Nokia's inability to operate independently.
"People did not quite understand a year and a half ago what a partnership with Microsoft would mean. Now Microsoft calls the shots and Nokia simply follows," Hakkarainen said.
Tuominen said Nokia was now reacting rather than acting independently, and "this recent news about upgrading problems indicates that the company's partnership with Microsoft has its problems."
Nokia has made no announcement about future phone launches and "expects to be selling and supporting phones on Windows Phone 7.5 for a long time," the company said in a statement on Monday.