Nokia in Talks to Buy Alcatel-Lucent (opens in new tab)

As per the article, with italic emphases mine: "A year ago, Nokia sold its struggling handset business to Microsoft Corp. This week's media reports were focused on the idea that Nokia may buy Alcatel-Lucent's mobile networks arm, which would be a simpler deal to carry out than a full combination but would leave the French firm much smaller."

In short, Nokia sold their iconic and consumer-facing handset division (what they used to call their "Device & Services Business"[1]) to Microsoft in November 2013, although the sale didn't officially complete until April 2014. However, after the divestiture Nokia still existed as a corporate entity with the majority (over 90%) of the revenues coming from their Nokia Solutions and Networks division (NSN) [2]. NSN and ALU's mobile networks division are direct competitors in the telecommunication equipment and software market, so a potential merger makes sense depending on which side of the table you're on.

[1] http://company.nokia.com/en/news/press-releases/2014/04/25/n...

[2] http://www.economist.com/news/business/21590363-after-sale-i...

Many people seem to have trouble grasping that Nokia still exists as a separate entity after being "sold" to Microsoft.

Think about it like this: IBM made laptops. IBM sold the laptop division to Lenovo. Lenovo now makes laptops using IBM's old brandname (Thinkpad). IBM still exists and is doing other stuff.

Ergo, Nokia made phones. Nokia sold the phone division to Microsoft. Microsoft now makes phones using Nokia's old brandnames (Lumia and Asha). Nokia still exists and is doing other stuff.