Microsoft buys Nokia mobile unit and grabs patent licence for €5.44bn

Ballmer calls move a "bold step into the future" as firms hope for salvation in each other's arms

Microsoft has bought Nokia's mobile phone unit for €3.79bn in a major play to try and improve its presence in the mobile market.

Microsoft will also pay €1.65bn to license Nokia's patents for 10 years, making a total transaction price of €5.44bn. The deal will integrate Nokia's design, manufacturing and marketing team into Microsoft's business.

The buy, which will close in the first quarter of 2014, is a slight surprise as it emerged in June that the two firms had held "advanced talks" over an acquisition. This fell through due to concerns over Nokia's declining mobile market share.

However, Microsoft's recent attempts to gain traction in the mobile device market with its own hardware have been a struggle, with the firm selling just $853m of its Surface tablet.

Microsoft is hoping this significant purchase will not only accelerate sales, but also speed up research and development, as well as creating "unified branding and marketing". Microsoft is also buying Nokia's mapping services including its Here platform; a licence for the latter has been purchased for four years.

Microsoft chief executive Steve Ballmer, who is set to retire within a year, said the deal was a "a bold step into the future" for the company and a "win-win for employees, shareholders and consumers of both companies".

"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," Ballmer noted.

"In addition to their innovation and strength in phones at all price points, Nokia brings proven capability and talent in critical areas such as hardware design and engineering, supply chain and manufacturing management, and hardware sales, marketing and distribution."

Microsoft put emphasis on the purchase of Nokia's budget Asha brand, which it will then license back to Nokia. The firm said that the brand would serve as an "on-ramp" to Windows Phone devices.

Nokia's chief executive Stephen Elop, formerly of Microsoft, will become a Microsoft employee again, putting himself firmly in the running in the firm's hunt for a new chief. Nokia's other senior executives will also transfer to Microsoft, such as Jo Harlow, who will continue to lead the Smart Devices team.

Nokia interim chief executive Risto Siilasmaa said that the deal would secure the firm's future: "For Nokia, this is an important moment of reinvention and from a position of financial strength, we can build our next chapter. After a thorough assessment of how to maximise shareholder value, including consideration of a variety of alternatives, we believe this transaction is the best path forward for Nokia and its shareholders."

Finland will also serve as the location for a new data centre for Microsoft, which will serve its customers in Europe.

Nokia's Lumia smartphone brand currently holds an estimated 4.1 percent share of the smartphone market, which is currently dominated by Samsung and Apple. Lumia devices sold 53.7 million units in the second quarter of 2013, but are still not considered to be gaining significant traction despite including groundbreaking screen and camera technology.