Nokia to sell handset business to Microsoft for $7.2 bn

Two years after hitching its fate to Microsoft’s Windows Phone software, Nokia collapsed into the arms of the U.S. software giant, agreeing to sell its main handset business for 5.44 billion euros ($7.2 billion).

Nokia, which will continue as a maker of networking equipment and holder of patents, was once the world’s dominant handset manufacturer, but was long since overtaken by Apple and Samsung .

Nokia’s Canadian boss Stephen Elop, who ran Microsoft’s business software division before jumping to Nokia in 2010, will now return to the U.S. firm as head of its mobile devices business.

He is being discussed as a possible replacement for Microsoft’s retiring CEO Steve Ballmer, who is trying to remake the U.S. firm into a gadget and services company like Apple before he departs.

In three years under Elop, Nokia saw its market share collapse and its share price shrivel as investors bet heavily that his strategy would fail.

In 2011, after writing a memo that said Nokia was falling behind and lacked the in-house technology to catch up, Elop made the controversial decision to use his former firm Microsoft’s Windows Phone for smartphones, rather than Nokia’s own software or Google’s ubiquitous Android operating system.

Nokia, which had a 40 per cent share of the handset market in 2007, now has a mere 15 per cent market share, with an even smaller three per cent share in smartphones.

The sale of the handset business is not the first dramatic turn in the 148-year history of a company which has sold everything from television sets to rubber boots.

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