Microsoft and Nokia Board of Directors have today proclaimed that they have decided to enter into a transaction that involves Microsoft purchasing substantially all of Nokia’s Devices & Services business, license Nokia’s patents, and license and use Nokia’s mapping services.

According to the terms of the agreement, Microsoft will pay EUR 3.79 billion for this purchase and EUR 1.65 billion to license Nokia’s patents, for a total transaction price of EUR 5.44 billion in cash.

Microsoft will draw upon its overseas cash resources to fund the transaction. The transaction is expected to close in the first quarter of 2014, subject to approval by Nokia’s shareholders, regulatory approvals and other closing conditions.

In relation to the partnership with Nokia which was announced in February 2011 and the increasing success of Nokia’s Lumia smartphones, Microsoft aims to increase the growth of its share and profit in mobile devices through faster innovation, increased synergies, and unified branding and marketing.

For Nokia, this transaction is expected to be significantly accretive to earnings, strengthen its financial position, and provide a solid basis for future investment in its continuing businesses.

“It’s a bold step into the future – a win-win for employees, shareholders and consumers of both companies. Bringing these great teams together will accelerate Microsoft’s share and profits in phones, and strengthen the overall opportunities for both Microsoft and our partners across our entire family of devices and services,” said Steve Ballmer, Microsoft chief executive officer. “In addition to their innovation and strength in phones at all price points, Nokia brings proven capability and talent in critical areas such as hardware design and engineering, supply chain and manufacturing management, and hardware sales, marketing and distribution.”

“After a thorough assessment of how to maximize shareholder value, including consideration of a variety of alternatives, we believe this transaction is the best path forward for Nokia and its shareholders. Additionally, the deal offers future opportunities for many Nokia employees as part of a company with the strategy, financial resources and determination to succeed in the mobile space,” said Risto Siilasmaa, Chairman of the Nokia Board of Directors.

In the agreement, about 32,000 people are expected to transfer to Microsoft, including 4,700 people in Finland and 18,300 employees directly involved in manufacturing, assembly and packaging of products worldwide. The operations as well are planned to be transferred to Microsoft generated an estimated EUR 14.9 billion.

Microsoft is also acquiring Nokia’s Smart Devices business unit, including the award winning Lumia brand and products. As part of the transaction, Nokia is assigning to Microsoft its long-term patent licensing agreement with Qualcomm, as well as other licensing agreements.

Nokia’s Mobile Phones business unit will also belong to Microsoft,including the Asha brand and will license the Nokia brand for use with current Nokia mobile phone products.

Nokia will, however continue to own and manage the Nokia brand. This element provides Microsoft with the opportunity to extend its service offerings to a far wider group around the world while allowing Nokia’s mobile phones to serve as an on-ramp to Windows Phone.

Nokia will also retain its patent portfolio and will grant Microsoft a 10-year license to its patents at the time of the closing. Microsoft will grant Nokia reciprocal rights to use Microsoft patents in its HERE services. In addition, Nokia will grant Microsoft an option to extend this mutual patent agreement in perpetuity.

Moreover,Microsoft will become a strategic licensee of the HERE platform, and will separately pay Nokia for a four-year license.

Microsoft will also immediately make available to Nokia EUR 1.5 billion of financing in the form of three EUR 500 million tranches of convertible notes that Microsoft would fund from overseas resources. If Nokia decides to draw down on this financing option, Nokia would pay back these notes to Microsoft from the proceeds of the deal upon closing. The financing is not conditional on the transaction closing.

Microsoft also announced that it has selected Finland as the home for a new data centre that will serve Microsoft consumers in Europe. The company said it would invest more than a quarter-billion dollars in capital and operation of the new data centre over the next few years, with the potential for further expansion over time.

Upon leadership, Nokia expects that Stephen Elop, Jo Harlow, Juha Putkiranta, Timo Toikkanen, and Chris Weber would transfer to Microsoft at the anticipated closing of the transaction.