After years of rumors about what former Microsoft (s msft) executive and current Nokia (s nok) CEO Stephen Elop had in mind for the world’s most prominent Windows Phone brand, it’s official: Microsoft is buying Nokia’s Devices and Services division for 5.44 billion euros, or just over $7.17 billion.
The deal will give Microsoft control of Nokia’s smartphone manufacturing, and 32,000 people who worked for Nokia last week now work for Microsoft, pending the completion of the deal, which the companies said was expected to close in the first quarter of 2014.
“We will continue to build the mobile phones you’ve come to love, while investing in the future – new phones and services that combine the best of Microsoft and the best of Nokia,” said Elop and Microsoft CEO (for now) Steve Ballmer, in an open letter published on Microsoft’s site.
After joining Nokia in 2010, Elop famously convinced Nokia’s board of directors and employees to abandon what he called its “burning platform” in 2011, a reference to the Symbian smartphone operating system that once dominated the smartphone market only to grow quite stale, and embrace Windows Phone as the operating system of its future. Coming from Microsoft, Elop’s strategy immediately sparked rumors that Microsoft would one day buy the smartphone maker, which along with Palm and Research in Motion (now BlackBerry) created the smartphone market that Apple and Google now own.
Microsoft is getting a 10-year license to the Nokia brand, which it may or may not use on future Microsoft smartphones. After Microsoft unveiled plans to make its own tablet device last year, many people in the mobile industry figured it was only a matter of time before the company released its own branded smartphone. However, sales of Microsoft’s Surface tablets have been quite poor, forcing the company to take a $900 million write-down on unsold inventory last quarter.
Nokia will now be a very different company. “Following the transaction, Nokia plans to focus on its three established businesses, each of which is a leader in enabling mobility in its respective market segment: NSN, a leader in network infrastructure and services; HERE, a leader in mapping and location services; and Advanced Technologies, a leader in technology development and licensing,” the company said in a press release announcing the deal.
Risto Siilasmaa, currently the chairman of Nokia’s board of directors, will immediately become CEO of what remains of Nokia, a smartphone pioneer that has been struggling ever since Apple unveiled the iPhone in 2007 and changed the notion of what it meant to be a smartphone. Until the deal closes, Elop will step down from the CEO position and become Executive Vice President of the Devices and Services division.
The deal comes at an extremely interesting time for Microsoft. Two weeks ago Ballmer announced that he plans to step down within 12 months, although you can’t find too many people in the tech industry (outside of Microsoft’s PR firm, Waggener Edstrom) who think he’ll remain on Microsoft’s executive team that long. Elop immediately becomes a front-runner candidate to succeed Ballmer.
(This story was updated frequently as more information became available. The headline and first paragraph were corrected Tuesday 9/3 with the correct price for the deal.)