Microsoft Corp. said it will buy Nokia's phone business for $7.2 billion, making its boldest foray yet into mobile devices and bringing well-regarded Nokia CEO Stephen Elop back into the fold.
Microsoft will pay $5 billion for the Nokia Corp. unit that makes mobile phones, including its line of Lumia smartphones that run Windows Phone software. It is also paying $2.2 billion for a 10-year license to use Nokia's patents, with the option to extend it indefinitely.
"We are very excited about the proposal to bring the best mobile device efforts of Microsoft and Nokia together," Microsoft CEO Steve Ballmer said.
Elop, a former Microsoft executive, will return to join the company while its board ponders a successor to Ballmer, who will depart sometime in the next 12 months after initiating an internal reorganization intended to transform the software company into a "devices and services" giant in the mold of Apple Inc.
Ballmer has been criticized for missing the mobile revolution, kicking off Microsoft's foray into the market with the tepid-selling Surface tablet only in 2012. Elop has been cited among the frontrunners for Ballmer's job.
Buying Nokia's gadget business thrusts Microsoft deeper into the hotly contested, lower-margin mobile devices market, despite some investors urging the company to stick to its core strengths of business software and services.
Others applauded Ballmer's aggressive gambit.
"This is huge but necessary gamble from Microsoft. After years of misfires with Windows Mobile Phone, it is changing gear and taking control of both software and hardware," said Geoff Blaber, Director of Devices and Software Platforms at CCS Insight, a global mobile devices consultancy firm.
Finland's Nokia, once the undisputed leader in mobile phones, has been struggling to respond to the challenge from smartphone makers such as Apple and Samsung Electronics.
Analysts say Elop's bold bet in 2011 to adopt Microsoft's untested Windows Phone software has yet to pay off, but Ballmer is confident the sale will bring synergies.
"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," Ballmer said.
Nokia Chairman Risto Siilasmaa will stay in his current role and assume the duties of interim CEO. When the deal closes in early 2014, about 32,000 Nokia employees will transfer to Microsoft, the companies said.
Al Jazeera and wire services