Microsoft agreed to buy Nokia’s mobile phone business in a deal that worth 5.4bn euros ($7.2bn; £4.6bn).
Nokia Lumia 1020 with 41-megapixel camera is powered by Microsoft’s Windows Phone 8 OS
Nokia will also license its patents and mapping services to Microsoft. Nokia shares jumped 35% on the news, whereas Microsoft’s fell more than 5%.
The purchase is set to be completed in early 2014, when about 32,000 Nokia employees will transfer to Microsoft.
Nokia has fallen behind rivals Samsung and Apple, while critics say Microsoft has been slow into the mobile market.
As Microsoft agreed to buy Nokia, Microsoft chief executive Steve Ballmer described the deal as a “big, bold step forward” while talking to BBC. He told BBC that his company was in the process of transforming itself from one that “was known for software and PCs, to a company that focuses on devices and services”.
“We’ve done a lot of great work in the two-and-a-half years that we’ve been in partnership with Nokia, going literally from no phones to 7.4 million smart Windows phones in the last quarter that was reported,” he said.
But he admitted: “We have more work to do to expand the range of applications on our product.”
Priority move
Microsoft, one of the biggest names in the technology sector, has struggled as consumers have shunned traditional PCs and laptops in favour of smartphones and tablet PCs.
Critics say the firm has been too slow to respond to the booming market for mobile devices. It launched its Surface tablet PCs last year, but sales of the devices have been relatively slow.
Analysts said that the company wanted to make sure that it got its strategy right in the mobile phone market. “Mobile is an area of tremendous potential but it has been one of weakness for Microsoft,” Manoj Menon, managing director of consulting firm Frost & Sullivan, told the BBC.
“Clearly the number one priority for the company is to get its mobile strategy right. From a strategy point of view, this deal is the perfect step, The only question is how well they can execute this plan.”
Ben Wood, an analyst at telecoms consultancy CCS Insight, said: “It’s a necessary gamble by Microsoft to break into mobile, but given its complete reliance on Nokia for Windows Phone devices and the competitive position of Apple and Google with rival phone platforms an understandable move.
“It completely reshapes Microsoft’s business pushing it firmly into hardware. But it also raises big questions about the sustainability of other firms, including HTC and Blackberry, remaining pure-play phone makers,” he added.
Nokia’s future
The transaction is still subject to approval by Nokia shareholders and regulators.
Nokia says that once the sale is completed, it will concentrate on three key businesses – network equipment manufacturing, mapping and location services, and the development and licensing of technology.
Earlier this year, it agreed to buy Siemens’ 50% stake in their joint venture, Nokia Siemens Networks (NSN), which makes telecoms network equipment, for 1.7bn euros.
As reported by BBC news