Microsoft Makes Surprise $7.2 Billion Deal for Most of Nokia

Microsoft has announced that it plans to acquire Nokia's devices and services business, as well as license its patents and mapping services in a $7.2 billion deal.

The transaction, expected to close in the first quarter of 2014 pending approval from Nokia's shareholders, will be paid in cash. The Redmond, Wash. software giant will pay $5 billion to buy the devices and services division and $2.2 billion to license the patents.

In a release, Microsoft said it aims to increase its share and profits in the mobile-device market "through faster innovation, increased synergies and unified branding and marketing." For its part, Nokia said the deal strengthens the company financially, and gives it an opportunity for reinvention.

Microsoft also published an email from CEO Steve Ballmer to company employees, describing the acquisition. His note, in part, reads as follows:

"Our Windows Phone partnership over the past two and half years has yielded incredible work â€" the stunning Lumia 1020 is a great example. Our partnership has also yielded incredible growth. In fact, Nokia Windows Phones are the fastest-growing phones in the smartphone market."

In 2011, Microsoft entered a partnership with Nokia, which adopted the Windows Phone operating system as its primary smartphone strategy. The agreement produced a range of phones, including the Lumia 920 and the Lumia 1020.

Tuesday's deal also means an immediate shakeup among Nokia's leadership, according to a release. Stephen Elop, formerly Nokia's CEO, is now Microsoft's executive vice-president of devices and services â€" and a front-runner to take over Ballmer's job when the Microsoft CEO steps down in the next 12 months.

For the time being, Risto Siilasmaa will be Nokia's interim CEO and continue to serve as chairman of the company's board of directors.

Key Nokia engineers, including Jo Harlow, Timo Toikkanen, Stefan Pannenbecker and Juha Putkiranta, are also joining Microsoft.

"Building on our successful partnership, we can now bring together the best of Microsoft’s software engineering with the best of Nokia’s product engineering, award-winning design, and global sales, marketing and manufacturing,” Elop said in a statement.

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Image: Mashable