Microsoft Buys Nokia's Phone Division

Microsoft announced a plan to purchase Nokia's Devices and Services business and license Nokia's mobile phone patents for a total of US$ 7.2 billion. The two companies have been in a partnership since 2011, in which Nokia agreed to distribute the Windows Phone operating system on its mobile phones. The 2011 pact appeared with much fanfare as statement of Microsoft's desire to compete directly with rivals Google and Apple for the lucrative smartphone market, but it did not live up to the expectations of either company, leaving Windows Phone OS mired in a distance fourth place and doing little to rescue Nokia from its downward trajectory.

By buying Nokia's phone biz, Microsoft ensures it will be able to continue its quest for smartphone market share without having to worry about the stability of Nokia. Also, Microsoft picks up some important weapons for competing with Google and Apple, including an established product line and even some important software components, such as Nokia's mapping tools.

Microsoft's purchase of Nokia's phone business mirrors Google's own purchase of Motorola's phone division a year ago. Given previous failures and false starts, it is uncertain whether Microsoft will succeed in this effort to become a 21st century "devices and services company" rather than a 20th century home and business software house, but this latest step confirms that they are serious about competing with Google, and they fully intend to challenge Google across all of its core business sectors -- including smartphones.