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Stand by for a new battle of the phone giants

The Nokia Lumia 920 already uses the Windows Phone 8 operating system. Photo: Inga Kjer/DPA/Press Association Images

The technology that brings people together today united two giant corporations as Microsoft announced it will buy Nokia's phone business for just over £4.5 billion.

According to Steve Ballmer, the outgoing Microsoft boss, it is "win, win" for both - but what about the customers?

Nokia was once the biggest name in handsets, but it's battled to keep up as phones got faster, thinner and smarter.

In 2007, Nokia had a 40% share of handsets - now it has just 3% of smartphones.

Microsoft has been trying to make in-roads into the fast growing market, but so far just 3% of smartphones use its software.

What's really happening here is that Microsoft and Nokia are playing catch-up. Already their big rival, Apple, has its computing power in its own handsets. Google has the same - owning Motorola.

But now we get a third force with that potential.

In 2007, Nokia had a 40% share of handsets - now it has just 3% of smartphones. Credit: REUTERS/Christian Hartmann

Up until now, Microsoft has had a close partnership with Nokia - but now that investment will move up a gear.

It has the financial power to develop new technologies and to push them into the shops with attractive deals.

More competition should bring better value and more innovation. To launch the new generation of enhanced reality smartphones will take big money - and it's vital the playing field isn't left to just a duopoly.

Microsoft's Xbox empire may also have big implications - the idea of taking gaming via mobiles to a whole new level now beckons.

Microsoft has offered to buy Nokia's mobile phone division for £4.6 billion. Credit: Sebastian Kahnert/DPA/Press Association Images

Smartphones put power in your palm equivalent to the world's biggest supercomputer of 20 years ago.

Today's merging of two technology giants helps paves the way for the next phase of innovation in this turbulent market.

What we can't yet know is whether Microsoft and Nokia will prop each other up or drag each other down.

It also seems to be the end of an old era of phones where the handset makers ruled the roost - the market (just like the phones) are getting far more complex.

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