Microsoft Corp has agreed to buy Nokia’s mobile phone business for USD 7.2 billion. Nokia’s CEO, Stephen Elop, would join Microsoft at the completion of the transaction. For Nokia, the development does auger good news given that the handset major has been struggling with its business model in the last few years and despite many initiatives, was unable to reclaim its once leadership position.

In its announcement, Microsoft has said that it will buy Nokia’s phone business and acquire Qualcomm and other key IP licenses. It will also license Nokia’s patents for use across all Microsoft products and will license the ability to use Nokia’s Here. Nokia will retain Nokia Solutions and Networks (NSN), Here (the combined brand name that houses the formerly known Ovi Maps and Nokia Maps), its CTO office and its patent portfolio.

The buyout deal is expected to close in the first quarter of 2014.

“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 Microsoft’s outgoing CEO, Steve Ballmer, in a company statement.

Nokia said that it expected that Mr Elop, along with senior executives Jo Harlow, Juha Putkiranta, Timo Toikkanen and Chris Weber to transfer to Microsoft when the deal was concluded. Nokia board Chairman Risto Siilasmaa would take over CEO duties while the Finnish firm looked for a new CEO.