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Microsoft buys Nokia in cash deal worth more than $7 billion (+video)

Microsoft buys Nokia: Struggling hardware manufacturer Nokia will be snapped up by software giant Microsoft. 

By Matthew Shaer / September 3, 2013

Microsoft Corp CEO Steve Ballmer displays a Nokia Lumia 920 featuring Windows Phone 8 during an event in San Francisco, Calif., in this October 29, 2012, file photo. Two years after hitching its fate to Microsoft's Windows Phone software, Nokia collapsed into the arms of the US software giant on September 3, 2013, agreeing to sell its main handset business for 5.44 billion euros, or upwards of $7 billion.

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Way back in 2011, Nokia announced that Microsoft's Windows software would replace the Symbian OS on all its smart phones. The partnership has proved fruitful – Nokia has released a number of popular Windows-powered phones, including the high-powered Lumia 1020

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And now the two companies are taking their relationship to the next level. Earlier today, Microsoft officially announced that it would acquire Nokia in a cash deal worth more than $7 billion – a deal that includes all of Nokia's valuable patents. 

"Now is the time to build on this momentum and accelerate our share and profits in phones," Microsoft CEO Steve Ballmer said in an e-mail to Microsoft employees obtained by Joanna Stern of ABC. "Clearly, greater success with phones will strengthen the overall opportunity for us and our partners to deliver on our strategy to create a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for the activities they value most."

Microsoft's mobile market share remains relatively small compared to that of Apple and Google's Android. But earlier this month, Kantar Worldpanel ComTech reported that Windows Phone had reached an 8.2 percent market share across the major European markets – the highest level for Windows Phone ever. According to Kantar Worldpanel, "one in 10 smartphone sales in Britain, France, Germany and Mexico" is a Windows device. 

By acquiring Nokia, Microsoft is signaling its willingness to continue to ramp up its presence in the smart phone wars. 

But what about Nokia? Well, over at BusinessWeek, Joshua Brustein calls the move "a blessing" for the Finnish company.

"Life is grim these days for second-tier smartphone companies," he says. "Nokia’s global market share in the mobile phone market has dropped to 14 percent, down from 19.9 percent a year ago, according to Gartner. The revenue the company brings in from its devices and services division is down by more than half since 2008. Perhaps most ominously, Nokia doesn’t register at all on the list of top smartphone sellers."

In other words, in many ways, the acquisition is the best that Nokia could have hoped for. 

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