On Monday, Microsoft Corp announced its intention to buy Nokia Oyj’s phone business and license its patents for 5.44 billion euros ($7.2 billion), making its boldest foray yet into mobile devices.
The sale of Nokia’s phone business marks the exit of a 150-year-old company that once dominated the global cellphone market and remains one of Europe’s premier technology brands, even though Apple and Samsung Electronics’ ascendancy all but reduced it to irrelevancy in Asia and North America in recent years.
The deal sent Finnish firm Nokia’s Helsinki-listed shares over 41% higher on Tuesday, a move reported by Bloomberg as a record advance. Microsoft shares registered little pre-market activity.
Nokia – reduced to its networks business, navigation offerings and patent portfolio after the sale – is still the world’s No. 2 mobile phone maker behind Samsung, but it is not in the top five in the more lucrative and faster-growing smartphone market.
As part of the deal, Microsoft will own the company which has been a leader in creating the Lumia line of smartphones that run Microsoft’s Windows Phone operating system. Microsoft is paying $5 billion to buy Nokia’s Devices & Services unit and an additional $2.2 billion to license Nokia’s patents for $2.2 billion.
The deal formally puts the two companies together after collaborating closely since Feb. 2011 to create handsets that compete with those from Apple and Samsung.
Sales of Nokia’s Lumia series have helped the market share of Windows Phones in the global smartphone market climb to 3.3 percent, according to consultancy Gartner, overtaking ailing BlackBerry Ltd for the first time this year. Still, Google Inc’s Android and Apple’s iOS system make up 90 percent of the market.
The move is one of the boldest yet by CEO Steve Ballmer, who stated last month he plans to retire in 12 months. Elop, a former Microsoft executive who took the helm of Nokia, has been cited among the frontrunners to take over from Ballmer.
The deal’s total value makes it the second largest ever done by Microsoft, just behind the $9.3 billion buy of Internet phone service Skype in May 2011, says S&P Capital IQ.
“Nokia and Microsoft have always dreamed big,” said Ballmer and Nokia chief Stephen Elop in an “open letter” blog post.
“We dreamed of putting a computer on every desk, and a mobile phone in every pocket, and we’ve come a long way toward realizing those dreams. Today marks a moment of reinvention.”
The deal is expected to close in the first quarter of 2014 subject to shareholder and regulatory approval.