Microsoft to Buy Nokia's Device Business for Over $7 Billion

Microsoft has announced plans to purchase Nokia's phone business. The news was announced late Monday night and will see Microsoft purchase Nokia's Devices & Services business (including the Lumia brand and products) as well as license to use Nokia's patents for a total of €5.44 billion or $7.17 billion by today's conversion rates. Microsoft says it will draw on its overseas cash resources to fund the transaction, which is expected to close early next year provided it gets the go ahead from Nokia's shareholders and the usual regulatory bodies. Under the terms of Monday's acquisition agreement, 32,000 Nokia staff, including 4,700 from Finland, will transfer to Microsoft.

"Building on our successful partnership, we can now bring together the best of Microsoft’s software engineering with the best of Nokia’s product engineering, award-winning design, and global sales, marketing and manufacturing," said Nokia's Stephen Elop. "With this combination of talented people, we have the opportunity to accelerate the current momentum and cutting-edge innovation of both our smart devices and mobile phone products."

Though the news comes as a shock, it's not a total surprise. Back in May of 2011, there were rumors that Microsoft was to acquire Nokia's mobile division. Nokia had just bet the farm on Windows Phone having spent too long floundering in the smartphone space with its own software solution. The company's firm backing of Windows Phone just a few months previously, in February 2011, lent credence to the reports. However, a Nokia UK spokesperson scoffed at the rumors, labeling them 'inaccurate.'

The deal makes sense for Microsoft for a lot of reasons. One of the biggest ones is, obviously, the Lumia line of Windows Phone devices. Nokia has the most notable Windows Phone devices on the market. It's no surprise Microsoft would want to own the brand. Unfortunately, this doesn't rule out the possibility that other Windows Phone partners might decide there's no competing with Microsoft itself and throw in the towel.

Speaking in a blog post published last night, Microsoft CEO Steve Ballmer said the deal represented a 'bold step into the future' for Microsoft.

"For Microsoft as well, today is a bold step into the future, a huge leap forward on our journey of creating a family of devices and services that delight people and empower businesses of all sizes," he said. "Our partnership over the past two and a half years, which combined our respective strengths to build a new global mobile ecosystem, has created incredible results: award-winning phones and amazing services that have made Nokia Windows Phones the fastest-growing smartphones in the world."

Earlier this month, Ballmer announced his plans to retire from Microsoft within the year, so he won't be around to see how this one pans out. Instead, he'll be watching from the outside with the rest of us.

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Note: An earlier version of this story incorrectly stated that Microsoft had also purchased Nokia's patent portfolio. The story has been updated correct this error.