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Microsoft is getting further out of the phone business, while the Nokia brand is attempting a comeback

A new Finnish company is licensing the iconic phone brand and buying Microsoft's feature phone operation.

A low-end Nokia 105 smartphone
Microsoft has been using the Nokia brand on its low-end feature phones, such as this Nokia 105.

A series of deals was announced early Wednesday that will see a new Finland-based company selling Nokia-branded phones and Microsoft further retreating from the mobile hardware business.

The new company, HMD global, is acquiring from Nokia a 10-year license to use that brand on phones and tablets, as well as acquiring from Microsoft that company's feature phone unit, which has also carried the Nokia brand.

HMD, along with a unit of China's Foxconn, will pay Microsoft $350 million to acquire the feature phone business, including its distribution channels and a Vietnam-based manufacturing facility. The new company is also pledging to invest $500 million to build up its new business.

About 4,500 Microsoft workers will be able to transfer to one of the two companies when the deal closes in the second half of the year.

Nokia, for its part, is licensing its brand and patents, and will get a seat on HMD's board, but won't own a piece of the new company. It says the deal does entail a series of requirements to ensure HMD upholds the Nokia brand.

Once all the deals close, HMD will be run by Arto Nummela, who is running the Microsoft feature phone business and serving as overall head of Microsoft's mobile devices business in Asia, the Middle East and Africa.

"Today marks the beginning of an exciting new chapter for the Nokia brand in an industry where Nokia remains a truly iconic name," Nokia Technologies president Ramzi Haidamus said in a statement. "Working with HMD and FIH will let us participate in one of the largest consumer electronics markets in the world while staying true to our licensing business model."

Recode reported last year that Nokia was eyeing a return to the phone business through a licensing deal. The company had originally sought to have a partner lined up by the end of last year, but Nokia CEO Rajeev Suri said the company was taking its time in order to have the right deal in place.

HMD's license from Nokia is exclusive, with the exception of in Japan. The companies aren't yet talking about what they have in store for the Nokia-branded phones.

"There is still much work for HMD to do, so you’ll need to wait a bit longer to see what the next wave of Nokia phones and tablets look like," Nokia said on its website. "One thing we can assure you is that they will exemplify what you have come to expect from all Nokia devices, including quality, design and innovation."

As for Microsoft's future in phones, it sounds even less promising. The company has now sold the one part of the phone business that still sold a decent volume of phones. Plus, while it continues to develop Windows for phones, the company has slashed both its ambitions and thousands of jobs over the past two years amid a substantial drop in its sales.

Amid Wednesday's transaction, Microsoft committed only to continued development of phone software and "supporting" the Lumia products in the market.

IHS technology analyst Ian Fogg noted that feature phones accounted for 87 percent of the phones Microsoft shipped in the first quarter of this year. Microsoft sold just 2.3 million of its Lumia smartphones. (Correction: An earlier version of the story misstated the number of phones Microsoft sold.)

"The deal again highlights Microsoft’s continued failure in mobile," Fogg said. "Its smartphone future is up in the air as Microsoft has yet to release any new competitive flagship devices for Windows 10 Mobile with new innovative hardware designs as they have with Surface tablets."

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