Microsoft and cellphone maker Nokia were in advanced talks about an acquisition of the Finnish company's device business, but the discussions have broken down, according to a report in The Wall Street Journal.
Such a deal might have improved both companies' ability to compete in a world dominated by smartphones offered by Apple, which makes both hardware and software, and by Google, which relies largely on third parties for devices that run its Android OS.
But the talks, which took place as recently as this month, have faltered and aren't likely to be revived, The Wall Street Journal reported Wednesday. The discussions were held in London and the companies were close to an oral agreement about a combination, the report said.
The deal hit snags regarding price and the market position of Nokia, which trails far behind both Apple and Samsung, the Journal said.
Microsoft declined to comment on the report. Nokia could not immediately be reached for comment.
An acquisition of Nokia by Microsoft is an idea that has seen some discussion in recent years. Two years ago, the companies formed a partnership in which Nokia would use exclusively Microsoft software to power its smartphones.
One idea behind the partnership was that by adopting Microsoft's Windows Phone as its primary smartphone platform, Nokia could make a better product on par with smartphone hardware powered by Google's Android operating system. Other hardware makers, including HTC, also make Windows Phone handsets.
When Nokia announced last year that it would be cutting 10,000 jobs, industry speculation grew over whether the time was right for Microsoft to make a move.
Were Microsoft to buy Nokia's device business, it would help the software company better compete against Apple and also bolster the company's broader position in a diverse market, industry analyst Jeff Kagan said in an email message.
"This is the kind of deal I have been thinking about ever since Microsoft and Nokia got together on the Lumia wireless phones," he said. "This is the perfect time for Microsoft to extend beyond their traditional business, and acquiring Nokia could be their ticket to do just that."
Microsoft already makes its own Surface tablets, as well as the Xbox gaming and entertainment consoles.