The deal set at 8 billion dollars will also see Nokia's CEO Stephen Elop joining the software giant afterwards.
Microsoft's outgoing CEO Steve Ballmer said that it is a bold step into the future and a win-win situation for the employees, shareholders and consumers of both the companies, The Age reports.
Nokia's shareholders and regulatory bodies are yet to approve the deal and Elop is speculated to succeed Ballmer when he steps down next year.
Under the deal, Microsoft will take over all of Nokia's devices and services business, including the mobile phones and smart devices business units along with a 32,000 strong staff
Nokia chairman, Risto Siilasmaa, who will become the interim CEO of Nokia, said that after a thorough assessment of how to maximise shareholder value, including consideration of a variety of alternatives, he believes this transaction is the best path forward for Nokia and its shareholders.
Microsoft has been struggling in the market dominated by Google's Android and Apple's iOS platform and the company's latest Windows 8 platform has been unable to strike a chord with the consumers.
Analysts doubt if the deal between two weakening companies could provide for a stronger competitor in the future.
--ANI (Posted on 03-09-2013)