Microsoft Corp. and Nokia were already close, but now they’re going through with the ceremony and entering a full-fledged union.

Microsoft will acquire the Devices & Services division of Finnish smartphone maker Nokia for $5.26 billion (EUR 3.79 billion) and licence Nokia’s patents for an additional $2.29 billion (EUR 1.65 billion), the firms are announcing this morning. Microsoft will also licence Nokia’s mapping services, familiar to Nokia customers as Ovi Maps.

For the past two years, Microsoft and Nokia have been working hand-in-hand – Nokia acting as the flagship mobile device maker for Microsoft’s Windows Phone 7 and then Windows Phone 8 devices. After its successful but dated Symbian operating system began a rapid market share decline in the face of competition from heavyweights like Google’s Android and Apple’s iOS, the Finnish phone manufacturer needed a software overhaul to win back customers and stay relevant.

Lumia smartphones come under Microsoft control

Given that its CEO Stephen Elop was a former Microsoft executive, the deal with Microsoft was no shocker. Since putting flesh to flesh on the deal to exclusively sell Windows Phone devices in February 2011, Nokia has released well-received Lumia branded smartphones and helped push Microsoft’s mobile device market share upwards, just recently past Waterloo, Ont.-based BlackBerry according to a report from IT consultant firm Gartner Inc. Gartner has also predicted Windows Phone will continue its upwards trend and be second only to Android in market share by 2015.

Microsoft’s all-out purchase of Nokia’s mobility division shows its serious about playing in the mobile space and wants to create a true device eco-system that hinges on the Windows platform. Recently announcing that it was going to focus on becoming a hardware and services firm, when its claim to fame has been about software, Microsoft will benefit from Nokia’s hardware making experience.

Since releasing Windows 8, an OS that is made to work just as well on tablets as it does on PCs, Microsoft has marketed itself as a company that can bring users a seamless experience across multiple devices and differing form factors. With cloud services including SkyDrive and Office 365 at its heart, Microsoft is building up an offering for all its customers that will allow them to access their files and continue working within a familiar user interface no matter what device they pick up. Now it’s looking to make the ideal hardware to tap into that eco-system. It’s already produced the Suface tablets in-house, and now Nokia’s smartphone division will allow them full control over the Windows Phone 8 alignment.

Elop a strong candidate for Microsoft’s next CEO

Thousands of Nokia employees – 32,000 in total, including 4,700 in Finland and 18,300 involved in manufacturing – will become Microsoft employees. Most notably, Elop will become executive vice-president of devices and services, in charge of the Nokia-branded portfolio now fully nestled under the wing of Microsoft.

Just last week, Microsoft’s CEO Steve Ballmer wrote an open letter stating his plan to retire within a year, after a replacement is selected by a special committee formed by Microsoft’s board that includes company founder Bill Gates. Speculators were already banking on Nokia’s Elop, a Canadian, to be a likely successor as a result of his former position at Microsoft and ongoing ties with the firm. Now that he’s once again a Microsoft employee, a promotion up to CEO level seems even more likely.

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  • Yeah. I think this is the only hope for Nokia, placing it in the hands of Microsoft. As what they say, that’s the Microsoft’s big step going to the future, making it through in smartphones.

  • zimer

    Yup, only for Nokia however though who is next in line for CEO of Microsoft? Time will tell if Windows Phones will stackup to Android & IOS …….. will be a slow start.
    Once again Microsoft late at the game …………. not a leader but a follower!!