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The Boston Globe

Business

Microsoft to buy Nokia’s devices unit for $7.2 billion

REDMOND, Wash. — Microsoft Corp. revealed late Monday it will buy Nokia Corp.’s devices and services business, getting access to the company’s patents, for $7.2 billion in an effort to expand its share of the smartphone market.

Microsoft will pay $5 billion for the Nokia unit that makes mobile phones, including its line of Lumia smartphones that run Windows Phone software. Microsoft is also paying $2.2 billion for a 10-year license to use Nokia’s patents, with the option to extend it indefinitely.

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‘‘We are very excited about the proposal to bring the best mobile device efforts of Microsoft and Nokia together,’’ Microsoft chief executive Steve Ballmer said in a memo to employees. ‘‘We are receiving incredible talent, technology, and IP (intellectual property).’’

Microsoft said it is acquiring Nokia’s Asha brand of low to mid-level smartphones and will license the Nokia brand for current Nokia mobile products.

‘‘This element provides Microsoft with the opportunity to extend its service offerings to a far wider group around the world while allowing Nokia’s mobile phones to serve as an on-ramp to Windows Phone,’’ the companies said in a joint statement.

Microsoft, based in Redmond, Wash., said it will draw from its overseas cash resources to fund the transaction. When the deal closes in early 2014, about 32,000 Nokia employees will transfer to Microsoft, the companies said.

Finland-based Nokia was once the mightiest company in the mobile phone business, but it has fallen out of place as the industry shifted to the era of the smartphone. Samsung and Apple divvy up nearly all of the profits in the global smartphone business now.

A megadeal between Nokia and Microsoft of the sort revealed Monday is something analysts have speculated about for years, after Stephen Elop joined Nokia as chief executive and signed a pact with Microsoft to standardize the software company’s Windows Phone operating system.

The fortunes of the two companies in the mobile business have become closely intertwined since that agreement, but the deal has done little to boost either company’s position in the mobile business. Windows Phone accounted for only 3.7 percent of smartphone shipments in the second quarter, according to IDC.

While Microsoft still has enormous stockpiles of cash from its lucrative software business, there has been widespread speculation about how long Nokia could make it as an independent company.

Nokia said Elop will step aside as chief executive to become executive vice president of Nokia devices and services. Chairman Risto Siilasmaa will assume the duties of interim chief executive.

Elop is expected to join Microsoft at the close of the transaction, along with several Nokia vice presidents.

Material from the Associated Press and The New York Times was used in this report.
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