The Deal: Microsoft Spends $7.2B on Nokia Unit

Tickers in this article: MSFT NOK

NEW YORK (TheStreet) -- Software giant Microsoft pushed ahead with a remake, buying the mobile phone activities of Nokia 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 43%, or ¿1.274, to ¿4.238 in afternoon Helsinki trading.

The smartphone revolution, launched in 2007 with the introduction of Apple Inc.'s iPhone, is sparking dealmaking reminiscent of the original cellphone revolution at 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," ETX Capital's Ishaq Siddiqi wrote 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 Inc.'s Android.

The company is trying to follow Apple's lead and become a devices and services provider. Elop, who joined Nokia from Microsoft in September 2012, 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.

"It's very clear to me that rationally this is the right step going forward," Elop said during a press conference that Microsoft's Ballmer also attended. Ballmer refused to divulge anything about a successor.

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.