Update: Microsoft to acquire Nokia's mobile phone business

Nokia will focus on network infrastructure, mapping and locations services and technology development and licensing

Microsoft is to acquire Nokia's Devices & Services business, which includes the smartphone and mobile phones businesses, and license the Finnish company's patents for a total of $7 billion in cash, the companies said Monday.

The Redmond, Wash., software company will pay 3.79 billion euros for "substantially all" of the Devices & Services business and 1.65 billion euros to license Nokia's patents at the close of the transaction.

Nokia CEO Stephen Elop will come back to Microsoft and lead an expanded devices team, Microsoft CEO Steve Ballmer said in an email to employees. Microsoft said it will draw on its overseas cash resources to fund the transaction.

At a press conference in Espoo, Finland, on Tuesday morning, Ballmer hammered home the importance of the deal for Microsoft.

"Today's announcement is a bold step into the future. For Microsoft, it's a signature event -- a signature event! -- in our transformation. We think this is a win-win for employees; win-win for shareholders, and win-win for customers of both companies. Through our partnership we have already accomplished so much, and yet clearly the opportunity ahead is remarkable. And I am incredibly optimistic about what we can achieve together," Ballmer said.

He also underlined Microsoft's plans to keep its mobile activities in Finland.

"We have no significant plans to shift around the world where work is done. ... Finland will become the hub in the center for our phone R&D, and we are counting very much on the incredible talent of Nokia employees to be a key part or driving and propelling Microsoft forward," Ballmer said.

Building on the partnership with Nokia announced in February 2011 and the increasing success of Nokia's Lumia smartphones, Microsoft aims to accelerate the growth of its share and profit in mobile devices through faster innovation, increased synergies, and unified branding and marketing, it said in a statement.

Nokia has been building smartphones around Microsoft's Windows Phone operating system in a bid to boost flagging market share, besides focusing on feature phones for emerging markets.

Following the transaction, Nokia plans to focus on its network infrastructure and services business called NSN, its HERE mapping and location services, and Advanced Technologies, focused on technology development and licensing. It will continue to own and maintain the Nokia brand but will license it to Microsoft for a 10-year period to use the brand on current mobile phones and some subsequently developed phones.

Risto Siilasmaa will take over as interim CEO for Nokia while continuing to serve as chairman of Nokia's board.

"Rationally, the transaction is the right step for Nokia. But emotionally this transaction is more complex. Nokia devices have connected people for decades, and in many markets Nokia is synonymous with mobile phones. I myself have been using a Nokia device since they were too heavy to carry around," Siilasmaa said at the Espoo press conference.

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