Stephen Elop, the Canadian CEO of Nokia who moves back to Microsoft under the €5.4-billion ($7.6-billion Cdn) deal the two companies struck today, has become a key contender in the race to lead Microsoft itself.

Last month, Microsoft CEO Steve Ballmer announced he would step down within a year, sparking an internal and external search for the next head of the tech behemoth.

Elop headed up Microsoft’s business services division before moving to Nokia four years ago and he rejoins Microsoft as executive vice-president for devices and services, an announcement made as part of the deal that sees Microsoft buying Nokia's lineup of smartphones and a portfolio of patents and services.

'Microsoft is an enormous company, it’s an international company and it’s in so many different businesses and it’s trying to get into so many other different businesses.'— Technology analyst Jeff Kagan

Elop, 49, has an edge as a candidate who has secured Microsoft’s expansion into mobile, first striking a major partnership with Nokia to develop the Lumia operating system, then bringing that business into the Microsoft fold. He brings with him some teams from Nokia who worked on the Windows Phone-Nokia deal and will manage an expanded unit as a result.

In comments made to the Seattle Times, Ballmer confirmed that Elop is definitely a prospect for the top job, noting that "Stephen will go from external [candidate] to internal" as part of the board’s wider search.

He’s not the only internal candidate – there’s also Terry Myerson, operating systems chief; Julie Larson-Green, in charge of Xbox and the Surface tablet; Eric Rudder, head of research and technology; and COO Kevin Turner.

Atlanta-based technology industry analyst Jeff Kagan agrees Elop is a strong candidate. The Nokia-Microsoft deal achieves two things, he said.

Getting Elop on the team

"One is so they can run the handset business – they see that as a big part of their future. But two is to get Stephen Elop on the Microsoft team and to decide whether they want him to replace Steve Ballmer," Kagan said in an interview with CBC News.

Microsoft is a complex company and will be assessing Elop on both his past record and his stickhandling of the wireless business, Kagan said.

"Microsoft is an enormous company, it’s an international company and it’s in so many different businesses and it’s trying to get into so many other different businesses," he said. " The question is does Elop have what it takes to run not just the wireless business, but all of Microsoft."

Kagan says Elop’s ascendancy is not a foregone conclusion and notes the somewhat limited success of Microsoft’s foray into wireless with Nokia. He points to companies such as Sprint that take several tries before they find a CEO with the right breadth of vision to drive the company forward.

"It’s important that they choose someone who understands all of Microsoft’s strengths and weaknesses," he said.

Varied background in software, equipment

Elop, raised in Ancaster, Ont., studied computer engineering and management at McMaster University in Hamilton, Ont., and worked at Lotus Development and Boston Chicken before joining U.S. graphics software firm Macromedia, where he rose to become CEO. He also has been COO of network equipment maker Juniper Networks and spent just two years as chief of Microsoft’s business division before leaving for Nokia in 2010.

Nokia, once a market leader in handsets, at that time was watching its star fall as Apple iPhone and the Google Android mobile operating systems took over the mobile market.

In 2011, Elop warned Nokia employees that the company would have to change, and quickly, to avoid a further fall. "We are standing on a ‘burning platform,’ and we must decide how we are going to change our behaviour," he wrote.

He was seen as a Trojan Horse, operating on Microsoft’s behalf, when Nokia chose Window Phone as the platform for its smartphones, but that move has helped halt the Finnish company’s slide. Elop’s credentials thus include the skill of bringing a company back from the edge, as well as a background in devices and software.

Some analysts point to Nokia’s still lacklustre market share as a strike against Elop. But Ballmer had fulsome praise for the potential of Windows Phone now that it is being run by Microsoft.

"We are very excited about the proposal to bring the best mobile device efforts of Microsoft and Nokia together," he said in an internal memo.

"Our Windows Phone partnership over the past two and half years has yielded incredible work— the stunning Lumia 1020 is a great example. Our partnership has also yielded incredible growth. In fact, Nokia Windows Phones are the fastest-growing phones in the smartphone market."

Microsoft’s absence in the smartphone market was long seen as a weakness and Ballmer seemed chuffed at both the possibilities for devices and the potential for Windows-based services going forward.

He also may be keen to groom an in-house successor such as Elop. Elop himself, however, has not commented on whether he will seek the position of Microsoft CEO.