Microsoft has agreed a deal to buy Nokia’s mobile phone unit for 5.4 billion euros ($7.2 billion).
Nokia will also license its patents and mapping services to Microsoft. Nokia shares jumped 45% on news of the deal.
The purchase is set to be completed in early 2014, when about 32,000 Nokia employees will transfer to Microsoft.
While Nokia has struggled against competition from Samsung and Apple, Microsoft has been criticized for being slow into the mobile market.
“It’s a bold step into the future – a win-win for employees, shareholders and consumers of both companies,” Steve Ballmer, chief executive of Microsoft, said in a statement.
The transaction is subject to approval by Nokia shareholders and regulators.
Microsoft, one of the biggest names in the technology sector, has struggled as consumers have shunned traditional PCs and laptops in favor of smartphones and tablet PCs.
Critics say the firm has been too slow to respond to the booming market for mobile devices. It launched its Surface tablet PCs last year, but sales of the devices have been relatively slow.
Microsoft has agreed a deal to buy Nokia’s mobile phone unit for 5.4 billion euros
Analysts said that the company wanted to make sure that it got its strategy right in the mobile phone market.
Nokia was once a leader in mobile phones, but the firm’s sales fell 24% in the three months to the end of June from a year earlier.
It sold 53.7 million mobile phones during the quarter, down 27% on last year.
However, sales of its new Lumia phones, which run a Microsoft operating system, rose during the period.
Microsoft has also agreed a 10-year licensing arrangement with Nokia to use the Nokia brand on current mobile phone products.
Nokia also announced changes to its leadership team as a result of the sale.
Stephen Elop will step down as president and chief executive of Nokia Corporation and resign from the company’s board.
The firm said that he would become the executive vice president of the Devices & Services unit, adding that it expected him to “transfer to Microsoft at the anticipated closing” of the deal.
The transfer of Stephen Elop to Microsoft comes at a time when the company is looking for a new chief executive.
The current head of Microsoft, Steve Ballmer, announced last week that he would be retiring and is expected to leave the company within the next 12 months.
Stephen Elop who left Microsoft to join Nokia in 2010, has been cited by some as one of the frontrunners to replace Steve Ballmer.
Nokia said that once the sale is completed, it will concentrate on three key businesses – network equipment manufacturing, mapping and location services, and the development and licensing of technology.
Earlier this year, it agreed to buy Siemens’ 50% stake in their joint venture, Nokia Siemens Networks (NSN), which makes telecoms network equipment, for 1.7 billion euros.
Global sales of mobile phones went into reverse in 2012 compared with the previous year, according to a report from research company Gartner.
The report said 1.75 billion handsets had been bought, marking a 1.7% decline.
Analysts at the firm suggested “tough economic conditions” had been partly responsible for the drop.
It follows official data from Spain indicating its number of mobile telephone and datacard subscriptions fell by 5% over the same period.
A report by the Spanish regulator CMT said there were nearly 2.8 million fewer such contracts at the end of the year than at the beginning, with Telefonica’s Movistar unit and Vodafone bearing the brunt of losses in December.
Spain’s gross domestic product (GDP) shrank by 1.3% in 2012, according to its central bank.
Gartner’s data suggests weakening demand for feature phones – lower-end devices with limited functionality – led to the drop. It said that in the final three months of the year, 264.4 million such devices had been sold – 19.3% fewer than over the same period in 2011.
Although smartphones had seen a 38.3% year-on-year gain over the fourth quarter, they had still remained in the minority with 207.7 million units sold, the study said.
Global sales of mobile phones went into reverse in 2012 compared with the previous year
Gartner added that Apple and Samsung had dominated the smartphone market, with a combined 52% share in the October-to-December quarter.
“There is no manufacturer that can firmly lay claim to the number three spot,” said the company’s principal research analyst Anshul Gupta.
“Their direct competitors, including those with comparable products, struggle to achieve the same brand appreciation among consumers.”
Anshul Gupta added that the overall fall in sales marked the first time the market had contracted since 2009.
Gartner’s data also indicated that in the fourth quarter, Android had powered 69.7% of all smartphones sold, while iOS had accounted for 20.9% of devices.
For the year, that marked a gain in share for Google’s operating system, but a decline for Apple’s – although in terms of units sold, both firms made gains.
Motorola Mobility is to cut 4,000 staff worldwide as part of efforts to return to profitability.
The job losses are the equivalent of 20% of its workforce.
The firm, bought by Google last year, said it planned to close or merge about one third of its 90 facilities which include offices and factories.
US-based Motorola also announced a shift in emphasis away from low-cost non-smartphones to “more innovative and profitable devices”.
Motorola Mobility is to cut 4,000 staff worldwide as part of efforts to return to profitability
Two-thirds of the jobs will go outside of the US, Google said. It expects the cost of severance packages to be $275 million.
“Motorola is committed to helping them through this difficult transition and will be providing generous severance packages, as well as outplacement services to help people find new jobs,” a statement said.
Motorola has lost money in 14 of the past 16 quarters, Google said.
The company, which once dominated the mobile phone market, has fallen behind its competitors, including Apple and Samsung.
According to one industry watcher, Strategy Analytics, Samsung overtook Nokia as the world’s biggest seller of mobile phones earlier this year.
Samsung sold more than 93 million handsets in the first three months of 2012, giving it a 25% market share. By contrast, Motorola said it had sold almost 9 million mobile devices over the same period, including 5.1 million smartphones.
Its most recent financial results showed that Motorola Mobility recorded a loss of $86 million in the first quarter of the year. That was greater than the $81m net loss it made in the same period a year earlier.
Google bought Motorola Mobility last year in a $12.5 billion deal, giving it access to more than 17,000 technology patents.
Apple has decided to halt the sale of all iPhone models from its stores in China, after large crowds disrupted the launch of the iPhone 4S.
An Apple store, in the Sanlitun area of Beijing, did not open on Friday after a large crowd gathered outside in anticipation of the launch.
The crowd became unruly, throwing eggs. Scuffles broke out with police.
Apple has decided to halt the sale of all iPhone models from its stores in China, after large crowds disrupted the launch of the iPhone 4S
China is the world’s largest mobile phone market, and Apple’s second-biggest market.
The iPhone 4S, which has voice-activated functions, was being introduced through official Apple stores in China for the first time.
Apple said in a statement that it decided not to open its store at Sanlitun “due to the large crowd, and to ensure the safety of our customers and employees”.
The company also said that it was halting the sale of iPhones at all retail stores in Beijing and Shanghai “for the time being”.
However, Apple said Chinese customers can still purchase the phones either through the Apple online store or at China Unicom and other authorized sellers.
The decision came despite the fact that other stores in Beijing and Shanghai opened without incident and reported rapid sales.
Apple said all iPhone 4Ss were now sold out in stores in China.
Crowds began gathering outside of Apple stores overnight and in the early morning. Police were deployed to a number of stores to help control the crowds.
Eggs were thrown at Apple’s Sanlitun store in Beijing after it failed to open on Friday at 07:00 local time as advertised.
When it was announced that the store would not be opening, there were shouts of “open the door” and “liar”.
Customers at the Sanlitun store said they were disappointed not to be walking away with any purchases.
“I’ve been waiting here since yesterday afternoon, then this morning they say they won’t sell,” a man in his 20s told Reuters TV.
“They broke customers’ hearts.”
By about 10:00 local time in Beijing, the crowds had cleared the area in front of Apple store.