HELSINKI: Microsoft Corp on Tuesday said it will buy Nokia's mobile phone business for 5.44 billion euros ($7.2 billion).
In a statement, Microsoft CEO Steve Ballmer says the deal will bring Nokia's capability and talent in hardware design, engineering, manufacturing, sales, marketing and distribution to Microsoft.
The companies say that when the deal closes in early 2014, about 32,000 Nokia employees are expected to transfer to Microsoft, including approximately 4,700 people in Finland.
The operations affected by the transfer generated approximately 14.9 billion euros in 2012, or almost 50 per cent of Nokia's net sales, the company said.
Of the total purchase price of 5.44 billion euros, 3.79 billion relates to the purchase of Nokia's Devices & Services business, and 1.65 billion relates to the mutual patent agreement and future option.
"It's a bold step into the future - a win-win for employees, shareholders and consumers of both companies,” Microsoft's outgoing CEO, Steve Ballmer, said in a statement.
“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.”
The deal is subject to approval by Nokia's shareholders and regulatory approvals.
Nokia plans to hold a news conference in Espoo, Finland, on Tuesday morning.
Nokia partnered in 2011 with Microsoft and uses Microsoft's Windows software to run its mobile phones.
Stepehen Elop, a Canadian hired by Nokia in 2010 from Microsoft, has been one of the favourites to take over as Microsoft chief when Ballmer steps down.
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.
Nokia said in a statement it expected that Elop, along with senior executives Jo Harlow, Juha Putkiranta, Timo Toikkanen, and Chris Weber, would transfer to Microsoft when the deal was concluded. It did not say what roles they would take at Microsoft.
Nokia board chairman Risto Siilasmaa would take over CEO duties while the Finnish firm looked for a new CEO, it said.
Analysts say Elop's bold bet in 2011 to adopt Microsoft's untested Windows Phone software has yet to pay off.
Last month, Nokia finalised the purchase of German engineering giant Siemens' 50 percent stake in Nokia Siemens Networks for 1.7 billion euros.
NSN, which is specialised in high-speed mobile broadband, was set up as a joint venture between the two companies in 2007, a partnership that expired in April. The unit has posted stronger earnings than Nokia's mobile phone business.
NSN posted a net profit of 8.0 million euros in the second quarter of this year, compared to Nokia's net loss of 227 million euros in the same period.