The new acquisition comes a little over week after Microsoft announced that CEO Steve Ballmer will be stepping down sometime in the next year as the company seeks to find a replacement.
Under the terms of the new acquisition, Microsoft pays € 3.79 billion ($5 billion USD) to acquire Nokia’s devices & services business.
Microsoft will also pay another € 1.65 billion to license Nokia’s patents, for a grand total of € 5.44 billion ($7.2 billion USD) in cash.
The deal allows Microsoft to license and use Nokia’s mapping services.
The transaction is expected to close in the first quarter of 2014 and will see Microsoft accessing its overseas cash resources to fund the new transaction.
On Tuesday both Nokia and Microsoft will be holding news conference to announce the terms of the new deal.
Microsoft entered the smartphone business late in the game compared to rivals Apple and Google and still lags way behind in terms of total global smartphone market share.
According to IDC, which tracks global smartphone market share on a quarter by quarter basis, Microsoft’s Windows phone is hovering near the bottom in third place with only 3.7 percent compared to Android’s 79.3 percent and Apple’s iOS at 13.2 percent.
On a year over year basis, Microsoft’s Windows smartphone market share is up 77.6 percent, the highest among all the others.
Nokia was the world’s largest vendor of mobile phones from 1998 to 2012.
In 2010 Nokia’s current CEO Steve Elop left his job at Microsoft to lead Finnish-based Nokia as the mobile phone maker’s total global market share saw major declines after their mobile-user base quickly embraced smartphones from growing rivals Apple and Google.
In 2011 Microsoft and Nokia forged a new partnership that allowed Nokia’s Lumia smartphones to run on Microsoft’s Windows software instead of relying on its older Symbian platform.
Samsung and HTC later decided to use Windows 8 software on some of their phones.
Microsoft is currently taking steps to assure all of their partners such as HTC and Samsung that they will maintain Windows 8 software as an open platform, similar to how Google successfully acquired Motorola and yet continued to offer Android as an open platform to all of their other partners.
Microsoft’s Hardware History
Microsoft blazed a new trail last year when the company decided to become a hardware maker of tablets in hopes of better competing against the likes of Apple’s dominant iPad tablet, Google’s Nexus 7 tablet, and Amazon’s Kindle Fire tablet.
So far Microsoft’s foray into hardware manufacturing with their Surface line up of tablets has not proven to be profitable.
Last quarter, Microsoft was forced having to write off a cool $900 million with their Surface RT tablet inventory.
The company also decided to drop the tablet sales price by $150.00.