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Microsoft will buy Nokia's devices and services unit for a sum of $7.2 billion. Apart from this, the Finnish phone maker will also license its patents and mapping services to the software giant. In a joint press release, the two companies said that the deal will be finalized in early 2014.
While around $5 billion will pay for Nokia's entire phone unit, $2.2 billion will go towards licensing its patents. Following the deal, about 32,000 Nokia employees will be transferred into Microsoft. As far as leadership is concerned, Stephen Elop, Nokia's current CEO, will step down form his current position and take up a role as executive vice president of the devices and services division at Microsoft. Risto Siilasmaa, Nokia's Chairman, will become Nokia's interim CEO while the company searches for a permanent replacement.
"Today's agreement will accelerate the momentum of Nokia's devices and services, bringing the world's most innovative smartphones to more people, while continuing to connect the next billion people with Nokia's mobile phone portfolio," Ballmer and Elop said in a joint statement. "It's a bold step into the future - a win-win for employees, shareholders and consumers of both companies," Ballmer, went on to add.
Back in September 2010, Stephen Elop left his position at Microsoft as head of the Business Division to join Nokia as CEO. Five months later, he announced at a developer's conference that Nokia would adopt Windows Phone 7 as its primary smartphone OS, thereby resulting in a strong relationship between the two companies. Since then, Nokia has sworn a solemn oath to the Windows Mobile platform, embracing it completely.
This move by Microsoft is in line with its ambitions of becoming a 'devices and services' company, a transition that it has been steadily attempting over the last few years. Products like the company's Surface tablet were offspring of the software giant's ambition. Thanks to this deal, Microsoft will now have direct control over handset design and manufacture, thereby allowing it to mimic Apple's strategy with the iPhone.
Over the last few years, with plummeting PC sales, it has become evident that mobiles and tablets are the future since they are being embraced by consumers globally. However, Microsoft has always had a weak front in these key areas. At the moment, the company's number one priority is to get its mobile strategy right and so the Nokia acquisition makes perfect sense.
Even though this deal might leave one with a lot of optimism for the Windows Mobile platform, it is worth noting that things aren't very rosy. For a while now, Nokia has been complaining about Microsoft's slow update cycles, hinting that the software giant might not be putting in its full efforts for the Mobile OS. However, this move is an indication that Microsoft will get its act together and put more of its resources behind Windows Phone platform.