The Deal: Microsoft Spends $7.2B on Nokia Unit

NEW YORK ( The Deal) -- Software giant Microsoft ( MSFT) on Tuesday, Sept. 3, pushed ahead with a remake, buying the mobile phone activities of Nokia ( NOK) for €5.44 billion ($7.16 billion), ending an era at the iconic Finnish company and bringing a key executive back to Redmond, Wash.

Microsoft said it would pay ¿3.65 billion for Nokia's Devices & Services unit and an additional €1.65 billion to license related patents. Nokia CEO Stephen Elop will also follow the division to Microsoft, where he previously worked and where he's rumored to be a successor to outgoing CEO Steve Ballmer.

Nokia's shares exploded, gaining 37.3%, or €1.11, to €4.07 in early Helsinki trade.

The smartphone revolution, launched in 2007 with the introduction of Apple iPhone, is sparking dealmaking reminiscent of the original cellphone revolution at the end of the turn of the millennium. Just Monday, Verizon Communications agreed to buy out its partner in the Verizon Wireless venture, paying a staggering $130 billion for Vodafone's 45% holding.

"Deal activity is back on board this year in a sign of corporate confidence," wrote ETX Capital's Ishaq Siddiqi in a morning note.

Microsoft's Ballmer earlier this year said he would vacate the top post after investors complained he missed a key move to smartphones and tablets. The only major manufacturer to have embraced its mobile Windows operating platform was Nokia but 90% of that market now belongs to Apple's iOS and Google's Android.

The company is trying to follow Apple's lead and become a devices and services provider. Elop is seen as the key to that remake, though Nokia itself has made several missteps in smartphones -- some would include adopting Microsoft's operating system in its series of handset errors.

Over a decade ago, Nokia was the darling of cellphone owners, leading in sales and making a household name out of a 150-year-old Finnish company.

Following the sale, Nokia will be left with its business making cellular network gear and providing mapping services.

"For a lot of us Finns, including myself, Nokia phones are part of what we grew up with. Many first reactions to the deal will be emotional," wrote Alexander Stubb, the Finnish minister for European Affairs and Foreign Trade, on Twitter.

Nokia, based in Espoo in the south of the country, in July agreed to pay Siemens AG €1.7 billion to buy the German company out of their 50/50 Nokia Siemens Network Oy venture. Analysts thought Nokia was positioning itself as a vertically integrated phone company, but CEO Elop apparently had other plans.

The Microsoft acquisition is expected to close in the first quarter of 2014 and the suitor said it would use existing overseas cash for financing. It may also buy €1.5 billion in convertible Nokia notes to be repaid when the deal closes.

Nokia said it would hold a shareholders' meeting to vote on the agreement Nov. 19.

--Written by Andrew Bulkeley