Microsoft now owns Nokia’s mobile business as part of $7.2 billion deal

Well, here’s an early morning surprise. Microsoft and Nokia have taken their strategic partnership a giant step forward, with Microsoft splashing out an incredible $7.2 billion to buy out the Finnish mobile maker’s Devices and Services unit.

What does that mean and why has Microsoft spent so much? It means that Nokia’s mobile phone manufacturing business, including the Microsoft-backed Lumia range of Windows Phones, is now owned by Microsoft. It’s not all of Nokia’s business, but it’s the part that matters most to Microsoft’s plan to become a ‘devices and services company’.

Expected to be finalised by March 2014, the deal comprises of €3.79 billion for Nokia’s business, plus a further €1.65 billion for its patent portfolio, which of course these days is vital. If you think this is a big deal – cast your mind back just two years ago when Microsoft paid $8.5 billion for Skype.

The deal will make Microsoft’s biggest Windows Phone supporter a part of the company itself, unifying software and hardware in a way which so far only Apple and BlackBerry have really done. Whereas the likes of HTC, Samsung and others will license Microsoft’s phone software and build their phones elsewhere, Nokia Lumia phones will be developed closely in conjunction with new software at Microsoft HQ. This in theory will lead to Lumia phones being bigger, better and with more exclusive software and features than ever before.

Microsoft CEO Steve Ballmer announced the deal this morning, just days after announcing he will retire from his position in 12 months. In a letter to Microsoft employees earlier today, Ballmer said that the move is “a bold step into the future” for the company.

Of course, the Lumia brand isn’t Nokia’s only product – their much more affordable range of Asha phones have been selling well in less developed countries for years. It’s believed that the Asha range was more of an attraction than the Lumia devices for Microsoft, as it hopes to break into emerging markets and get its brand name out as best as possible.

Nokia CEO Stephen Elop will step down from his role and will become head of Microsoft’s devices team. Of course, there will be plenty of rumour mongering with regards to the possibility of him replacing Steve Ballmer as Microsoft CEO, but we’ve still got a way to wait for that.

Finally, the question that’s probably lodged in many minds: Will there ever be another Nokia phone? Well, terms in the deal say that Nokia can only use its brand name on ‘feature phones’, or in simple terms, basic models. Any smartphones created by the Microsoft and Nokia partnership will be branded as Microsoft and not Nokia, so we’d all better get used to saying ‘Microsoft Lumia’.