The Redmond, Washington softward giant, Microsoft, will acquire Nokia's devices and services unit and license the company's mapping services in a deal worth 7.2 billion dollars. Microsoft hopes the purchase will improve the company's position in the smartphone market.

The creator and marketer of Windows will pay 5 billion dollars for "substantially all" of Nokia's phone unit and another 2.2 billion dollars to license its patents. As part of the deal, Stephen Elop will step down as Nokia chief executive to become the executive vice president of the devices and services division. Elop, a former Microsoft executive, is one of a handful of candidates considered a likely candidate to replace Microsoft president Steve Ballmer, who many believe will retire next year.

In a joint statement from Elop and Balmer both believed that the merger would accelerate the momentum of Nokia's devices and services, bringing the world's most innovative smartphones to more people, while continuing to connect the next billion people with Nokia's mobile phone portfolio.

Elop headed the successful Microsoft Business Division before leaving the post to lead Nokia three years ago. He joined Microsoft in January 2008 after serving as COO of Juniper Networks and as an executive at Adobe Systems.

Elop said that building a successful partnership can help bring together the best of Microsoft's software engineering with the best of Nokia's product engineering, award-winning design, and global sales, marketing and manufacturing. He went on to say that Nokia and Microsoft have the opportunity to accelerate the current momentum and cutting-edge innovation of both our smart devices and mobile phone products.