Microsoft will acquire Nokia's Devices and Services division for $7.2 billion, which means it will grab "substantially all," including Nokia's Lumia brand.

The software company will pay nearly $5 billion for most of Nokia's Devices and Services business and another $2.2 billion to license Nokia's patents. Overall, the deal is worth $7.2 billion in cash.

"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 CEO Steve Ballmer. "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."

"For Nokia, this is an important moment of reinvention and from a position of financial strength, we can built our next chapter," added Risto Siilasma, Chairman of the Nokia Board of Directors and, starting now, Nokia interim CEO. "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."

Under the terms of the deal, Nokia will grant Microsoft a 10-year non-exclusive license to its patents. In turn, Microsoft will give Nokia reciprocal rights to use its location-based patents. The transaction is still pending approval of Nokia's shareholders, as well as regulatory approvals and other closing conditions, but is expected to close in the first quarter of 2014.

Nokia CEO Stephen Elop will resign his current position and become Executive Vice President of the Microsoft Devices and Services division. Moreover, returning to Microsoft would also put Elop on the top of the list as a potential candidate to replace Stephen Ballmer, who recently announced plans to leave is position at the helm of the company.

Following this announcement, Nokia's Risto Siilasmaa will become the interim CEO for the Finnish company, while Nokia continues to search for a permanent replacement.

As part of this deal, roughly 32,000 people, Elop included, are expected to shift to Microsoft. This includes 4,700 employees in Finland and about 18,300 people directly involved in manufacturing, assembly and packaging worldwide.