Microsoft to buy Nokia's mobile phone arm for €5.4bn
Both have struggled to compete in the smartphone market but deal could help them take on Apple
MICROSOFT has announced that it is buying Nokia's mobile-phone business for €5.4bn (£4.6bn), in a bid to increase its share of the smartphone market.
The companies said the acquisition will be finalised in early 2014, when around 32,000 Nokia employees will transfer to Microsoft. Stephen Elop, Nokia's chief executive, will rejoin Microsoft as executive vice-president of Nokia devices and services. Elop originally left Microsoft in September 2010 to take over the Finnish company.
Nokia will also license its patents and mapping services to Microsoft.
In a joint statement, the two companies said the deal "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."
Investors are hoping the move will prompt a turnaround in both tech giants, who have struggled to keep up with the smartphone industry.
Nokia was once a global leader in the mobile phone market but has recently had difficulty keeping up with the competition from Apple and Samsung. In the three months to June this year, Nokia sold 53.7m phones, down 27 per cent from last year. However, on news of the deal, shares in the company jumped 45 per cent.
Although Microsoft is one of the biggest names in the technology sector, it has failed to capitalise on the increasing demand for smartphones and tablets by continuing to focus on traditional PCs and laptops. Although it launched its Surface tablet last year, sales have not been as high as hoped.
"Mobile is an area of tremendous potential but it has been one of weakness for Microsoft," Manoj Menon, managing director of consulting firm Frost & Sullivan, told the BBC. "Clearly the number one priority for the company is to get its mobile strategy right. From a strategy point of view, this deal is the perfect step. The only question is how well they can execute this plan." ·