Microsoft is buying Nokia

Microsoft said it would buy Nokia's phone business for à 5.44-billion , making its boldest foray yet into mobile devices and bringing well-regarded executive Stephen Elop back into the fold.

Nokia CEO Elop, a former Microsoft executive, will return as the company's board ponders a successor to current CEO Steve Ballmer, who will depart some time in the next 12 months after initiating an internal reorganisation intended to transform the software company into a "devices and services" giant in the mould of Apple.

Canadian Elop, hired from Microsoft in 2010, has been cited as being among the frontrunners for Ballmer's job. Ballmer has been criticised for missing the mobile revolution, kicking off Microsoft's foray into the market with the tepid-selling Surface tablet only in 2012.

Activist fund manager ValueAct Capital Management, which has been offered a board seat, is among those concerned with Ballmer's leadership and his attempts to plough headlong into the lower-margin, highly competitive mobile devices arena. The San Francisco-based fund, which manages about $12-billion for clients, owns 0.8% of Microsoft shares.

Others applauded Ballmer's aggressive gambit.

"This is a huge but necessary gamble from Microsoft. After years of misfires with Windows Mobile Phone, it's changing gear and taking control of both software and hardware," said Geoff Blaber, director of devices and software platforms at CCS Insight.

"If there was any concern that a new Microsoft CEO could back-pedal on the devices and services strategy that has now evaporated. This move permanently reshapes Microsoft's business."

As part of Microsoft, Elop will head an expanded devices unit.

Julie Larson-Green, who in July was promoted to head a new devices and studios business in Ballmer's grand reorganisation, will report to Elop when the deal is closed, scheduled for the first quarter of next year.

Finland's Nokia, once undisputed leader in mobile phones, has been struggling to respond to the challenge from smartphone makers such as Apple and Samsung.

Analysts said Elop's bold bet in 2011 to adopt Microsoft's untested Windows Phone software has yet to pay off.