Microsoft has agreed to buy Nokia’s handset business for nearly €5.5 billion.

The struggling Finnish mobile phone company is also selling its mapping division and technology patents to the American software giant.

Nokia was the world’s biggest mobile company a decade ago but has lost out to the likes of Apple’s iPhone and Samsung in the smartphone market.

Microsoft has been providing software for Nokia’s smartphones for the last two years and said today that the flagship Lumia phone shifted 7.4 million units in the three months to June. But that is a far cry from the 31 million iPhones sold.

In a statement this morning Microsoft chief executive Steve Ballmer said the takeover was a bold step into the future.

While Microsoft is hugely profitable it has failed to inroads into the mobile market.

“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,” Ballmer said.

More than 30,000 Nokia employees will transfer to Microsoft.

Among them will be its chief executive Stephen Elop, who is widely tipped as the new chief executive of Microsoft. Ballmer announced last month that he is stepping down.

Microsoft said in the statement that it will use cash held in its overseas subsidiaries to pay for Nokia.

And just to put the sale price into context, it is only just slightly higher than the profits made by Apple between April and June of this year.