Microsoft Buys Nokia’s Handset Business

Microsoft Corp. (Redmond, Wash.) has reached an agreement to acquire the handset and services business of Nokia Corp. (Espoo, Finland) for about $7.2 billion, The New York Times reports.

The computer giant said 32,000 Nokia employees will join Microsoft as a result of the all-cash deal, which would turn the Finnish mobile phone pioneer into the engine for Microsoft’s mobile efforts.

Stephen Elop, Nokia’s executive vp, will rejoin Microsoft after the transaction closes. The conjecture is that will set him up as a potential successor for current Microsoft ceo Steven Ballmer, who has said he will retire from the company within 12 months.

Elop has resigned as ceo and relinquished his Nokia board seat to avoid conflicts of interest. Ballmer declined to say whether Elop is now a leading contender to be his successor, given his familiarity with Microsoft and the importance of mobile to Microsoft’s future. “Our board is running an open succession process, considering internal and external candidates,” he said.

Both companies’ fortunes are an example of the rapidly changing world of digital communications, Nokia, once the leading company in the mobile phone business, has lost much of its luster due to the shift to the smart phone, now dominated by Samsung and Apple. Nokia remains the second-largest shipper of mobile phones in the world, after Samsung, but that is largely because of lower-end feature phones, from which consumers are moving away. Nokia is not among the top five makers of smart phones.