HELSINKI (AFP) – Mobile phone pioneer Nokia on Tuesday announced the sale of its sinking handset business to software giant Microsoft, which is fighting to catch up with rivals Apple and Google in the fierce smartphone market.
Nokia, the world’s leading mobile phone maker until last year, will now focus on network infrastructure and mapping services, which it called “the best path forward for Nokia and its shareholders.”
The sale for 5.44 billion euros ($7.17 billion) was cheered by Nokia investors, pushing the Finnish company’s share up more than 40 percent in late afternoon deals, but Microsoft shares fell 4.5 percent in early trading to $31.90.
Microsoft chief executive Steve Ballmer said the Nokia acquisition — the second-biggest in its history after Skype — was a “signature event in our transformation” and one that “will accelerate our success in smartphones.”
Nokia pioneered the mobile phone and dominated the market for 14 years, until it was overtaken by Samsung in 2012 as the top-selling brand.
The company, long the pride of Finland, was blindsided by the shift to smartphones and struggled to fight off increasing competition from Apple’s iPhone and Samsung’s Galaxy and rumors of a sale have swirled for months.
Microsoft and Nokia have been partnered since 2011, co-creating Nokia’s Lumia line of smartphones using Microsoft’s Windows Phone software.
— Microsoft attempting ‘to stem the decline in global product sales’ —
And with Tuesday’s deal, Microsoft is following in the footsteps of rival Google, which created the Android smartphone operating system and then branched into hardware when it bought phone-maker Motorola.
“The trigger behind this is without a doubt the current restructuring of business at Microsoft in which the tech giant attempts to stem the decline in global product sales,” ETX Capital analyst Ishaq Siddiqi said in a comment.
Microsoft “is still behind Apple and Android based handset devices in the global mobile phones market share but under this deal, Microsoft can start to take control of the operation and turn Nokia’s declining handset business into a formidable competitor in a competitive market,” he said.
Stephen Elop, the Nokia chief executive who was hired from Microsoft in 2010, will transfer back to his original employer, becoming a rumored replacement for Ballmer whose retirement was announced this summer.
Risto Siilasmaa, Nokia’s chairman of the board, will be Elop’s interim replacement.
In 2011, Elop spearheaded dramatic change at Nokia as he warned the company was “standing on a burning platform” and needed to shift course.
The shake-up involved rubbishing Nokia’s Symbian platform in favor of the partnership with Microsoft, and the launch of the Lumia smartphones.