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Microsoft Purchases Nokia for $7.2 Billion

Tech giant acquires all smartphone patents, deepens mobile competition between Apple and Google.

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Microsoft announced late Monday it has acquired Nokia's device and services business, including their smartphone and mobile phone line for $7.2 billion, a move that pushes the tech giant further into the device market.

[READ: Microsoft CEO Steve Ballmer to Retire Within 12 Months ]

Nokia has been in a strategic agreement with Microsoft since 2011, making the Windows Phone, Microsoft's mobile operating system, the exclusive platform for their smartphone line. The acquisition includes patents for Nokia's smartphones for use across all Microsoft products and will close during the first quarter of 2014.

Microsoft's acquisition was made just 10 days after CEO Steve Ballmer announced he would retire within the next year after a successor is chosen. In an Aug. 23 memo to Microsoft employees, Ballmer noted the company's focus on devices, a move that would allow the company to better compete with Apple and Google.

"Clearly, greater success with phones will strengthen the overall opportunity for us and our partners to deliver on our strategy to create a family of devices and services for individuals and businesses that empower people around the globe at home, at work and on the go, for activities they value most," said Ballmer in an email to Microsoft employees Monday.

According to the International Data Corporation, Google's Android mobile operating system has a dominant hold on the smartphone market, with nearly 70 percent of the market share last year, with Apple's iOS coming in second with 16.2 percent and Windows phone in third with 3.1 percent.

However, the Windows phone saw a 77.6 percent increase in between the second quarter of 2012 and 2013, making it the fastest growing mobile platform. Nokia has been the driving force behind the Windows phone, manufacturing 81.6 percent of smartphones running the mobile OS.

"Now is the time to build on this momentum and accelerate our share and profits in phones," said Ballmer.

[ALSO: Is Blackberry Too Big to Fail?]

Microsoft's foray into the tablet market has not fared as well. The Surface, launched last summer, incurred a $900 million hit in inventory adjustments in the fourth quarter of 2013, despite only pulling in $853 million in revenue between its release and June 30, according to an SEC filing.

Since Ballmer took over the reins upon founder Bill Gates' exit in January 2000, Microsoft's shareholders have seen their total returns drop nearly 20 percent, while stock prices plummeted 36 percent.

Nokia CEO Stephen Elop will resign from the Board of Directors to become the Executive Vice President of Devices & Services, according to a Nokia press release. Elop was the head of Microsoft's Business Division from January 2008 to September 2010.

 

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