Nokia buys Motorola’s networking division for $1.2 billion

Motorola has sold off a good chunk of its mobile equipment unit to Nokia in a deal that will net Motorola a wad of much-needed cash and give Nokia opportunity to expand in the fast-moving mobile environment.

It is one of the biggest cash deals ever in the mobile phone world. The deal involves Motorola passing on the part of its company that deals with technology to wirelessly transmit mobile signals throughout CDMA and GSM networks around the world. The only part of that unit that will not move over to Nokia is Motorola’s “push to talk” technology, which it licenses to Sprint Nextel among other companies.

The deal strikes a mutually beneficial arrangement between both companies. Motorola is set to spin off into two separate companies and it needs the extra cash to do so. Because its mobile phone division is growing at such a rapid pace, it is expected that Motorola will turn that part of its business into its own company while everything else, like set-top cable boxes, will fall into a separate company.

Nokia, meanwhile, is in dire need of getting back relevance in the US. Although it continues to have the highest mobile phone market share on a global scale, Nokia’s presence in America is dwindling significantly. Taking over Motorola’s networking equipment division will give Nokia an immediate in with Verizon, the country’s #1 wireless service provider.

Nokia “will see the benefits of a deal that is expected to enhance profitability and cash-flow and to have significant upside potential,” said the company’s CEO Rajeev Suri in a statement.

The deal, which includes the transfer of some 7500 employees from Motorola to Nokia, should be completed by the end of the year.