Microsoft to acquire Nokia’s handset business for $7.2 billion

Microsoft is buying Nokia’s mobile phone business and patents for €5.44bn ($7.2bn) in an all-cash deal that will reshape the telecoms industry on two continents.

The US company will pay €3.79bn for “substantially all” of Nokia’s phone unit and €1.65bn to licence its patents, in a big bet from Steve Ballmer, Microsoft’s outgoing chief executive, that the Finnish group’s mobile devices can rival those of Apple and Samsung Electronics.

The deal means Nokia becomes a telecoms equipment company, marking the latest dramatic change in its 148-year history. It ends a 30-year rollercoaster ride with phones that saw the group become the world’s biggest manufacturer of mobiles but also come close to financial ruin several times because of them.

Stephen Elop, Nokia’s chief executive, will step down to become head of the mobile phone business and return to his former company, Microsoft, where he has been flagged as one of the front-runners to replace Mr Ballmer.

“It’s a bold step into the future – a win-win for employees, shareholders and consumers of both companies. Bringing these great teams together will accelerate Microsoft’s share and profits in phones, and strengthen the overall opportunities for both Microsoft and our partners across our entire family of devices and services,” said Steve Ballmer, who announced last month he would be stepping down as Microsoft chief executive within a year.

“After a thorough assessment of how to maximise shareholder value, including consideration of a variety of alternatives, we believe this transaction is the best path forward for Nokia and its shareholders,” said Risto Siilasmaa, Nokia’s chairman and interim chief executive.

Nokia expects to book a gain of €3.2bn from the sale and will now be focused on three main areas: NSN, its telecoms equipment business that it recently seized control of from Siemens; its HERE mapping business; and a new unit known as Advanced Technologies to develop technology and licence patents.

The deal is subject to approval by Nokia shareholders and competition authorities and is expected to close in the first quarter of 2014.