Microsoft Corporation (NASDAQ:MSFT) announced on Monday that it will acquire Nokia Corporation’s (ADR)(NYSE:NOK) (BIT: NOK1V) (HEL: NOK1V) phone making unit for approximately $7.2 billion, including patents. Microsoft wants to add the Windows Phone ecosystem to its portfolio along with enhancing market share of the phone.

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According to Microsoft, the primary goal of the deal is to bring “one brand” through a “united voice.”

Win-win for Nokia and Microsoft

As per the terms of the deal, Nokia Corporation (NYSE:NOK) (BIT:NOK1V) (HEL:NOK1V) will retain authority of its other technology units like Nokia Solutions and Networks, Nokia Here, its CTO office and its patent portfolio.

According to Steve Ballmer, the chief executive officer of Microsoft Corporation (NASDAQ:MSFT), acquiring Nokia Devices and Services is a bold step and a win-win deal for both shareholders and employees. Merged together, the teams will contribute toward increasing the market share of Windows in phone segment.

“It’s very clear to me that rationally this is the right step going forward,” Stephen Elop, chief executive officer at Nokia, told reporters, but he also added that he feels “a great deal of sadness” over the outcome.

Details of the deal

The significant aspects of the deal, which is expected to be concluded in the first quarter of 2014, are summarized below:

  • The deal separates Nokia’s phone-making unit and its patents.  Microsoft Corporation (NASDAQ:MSFT) is expected to shell out $5 billion on acquiring the device making unit and $2.17 billion ((€1.65bn) on licensing Nokia’s patents.
  • Some 32000 of Nokia Corporation (NYSE:NOK) (BIT: NOK1V) (HEL: NOK1V) employees, including 4,700 people in Finland, will be moved to Microsoft.
  • Stephen Elop, chief executive officer at Nokia will rejoin Microsoft and will be the head of phone making division bought by the company.
  • Julie Larson-Green who is heading the Microsoft devices and studios will continue to work on the Xbox One and Surface devices, but will also be added to Stephen Elop’s team, once the deal is completed.
  • Tami Reller and mark Penn will supervise global marketing for both Nokia and Microsoft Corporation (NASDAQ:MSFT).
  • Patent portfolio will rest with Nokia Corporation (NYSE:NOK) (BIT: NOK1V) (HEL: NOK1V), but Microsoft will get a 10 year license to Nokia’s patents at the time deal concludes.
  • Microsoft will pay Nokia about €1.5 billion ($1.97bn), in three installments of €500 million ($659m) from oversees resources.
  • Shareholders at Nokia will probably vote on the deal in an extraordinary general meeting on November 19 this year.
  • Microsoft will establish a data centre in Finland, which will provide services to Microsoft and Nokia customers in Europe. Building datacenter will require $750 million in capital over the next few years.
  • Nokia board chairman Risto Siilasmaa would take over CEO duties while the Finnish firm looked for a new CEO.

Nokia’s stock gained 39 percent to 4.10 euros on Tuesday while Microsoft Corporation (NASDAQ:MSFT) shares in Frankfurt were down about 2.2 percent.