Helsinki - Shares in Finnish telecom giant Nokia soared by 45% on Tuesday after the company announced it was selling its mobile phone unit to Microsoft for €5.44bn ($7.2bn).
The share price jumped to €4.3 in opening trading on the Helsinki stock exchange, sending the overall market up by 4.3%.
Nokia will grant the US software giant a 10-year non-exclusive licence to its patents and will itself focus on network infrastructure and services, which it called "the best path forward for Nokia and its shareholders."
The company also announced the immediate departure of chief executive Stephen Elop, who was hired from Microsoft in 2010 to turn the company around.
He will be replaced in the interim by Risto Siilasmaa, Nokia's chairperson of the board.
Nokia dominated the mobile phone market for 14 years, until it was overtaken by Samsung in 2012 as the top-selling brand, as it struggled to establish winning business models and mobile devices.
The surge in Nokia boosted technology shares and helped European equities to set a one-week high. Nokia added the most points to the FTSEurofirst 300 index and helped the STOXX Europe 600 Technology index to rise 3% and lead all other sectors after the $7.2bn deal.
The scale of the move higher was fuelled by the large number of investors who had borrowed Nokia stock to sell on in the hope of further price falls, but who had then been forced to buy back after the announcement to limit their losses.Data from Markit showed that of the shares made available to be borrowed, 66% were out on loan.
The move marks the exit of the 150-year-old company from the global cellphone market it once dominated.
Amid increasing competition from Apple and Samsung, Nokia dramatically changed its strategy in February 2011 when Elop warned the company was "standing on a burning platform" and needed to shift course immediately.The shake-up involved phasing out Nokia's Symbian platform in favour of a partnership with Microsoft, introducing handsets powered by Windows Phone software.
Nokia bet its future on its new Lumia smartphones, aiming to rival Apple's iPhone and Samsung's Galaxy.
But Tuesday's announcement marks the end of Nokia's days as an independent phone manufacturer.
Some 32 000 Nokia employees are expected to transfer to Microsoft once the deal is concluded, including approximately 4 700 people in Finland, the company said.
Nokia will book a gain on the sale of some €3.2bn, which would "clearly strengthen our financial position and it will provide a solid basis for future investment in Nokia's continuing businesses," Siilasmaa said.Last month, Nokia finalised the purchase of German engineering giant Siemens' 50% stake in Nokia Siemens Networks for €1.7bn.The sale to Microsoft is expected to be completed in the first quarter of 2014, pending approval by Nokia shareholders and regulatory authorities, Nokia said.
Microsoft chief executive Steve Ballmer meanwhile told reporters in a conference call that Windows Phone was "the fastest growing smart platform today, growing by 78% last year."
"Today's agreement will accelerate our success in smartphones," he added.