I was still at Apple when Nokia announced it was turning its stake in Symbian into full ownership. The iPhone was days away from being a year old. I emailed my team and said something to the effect of “We’ve won, and our competitors know it.”

Nokia has been running scared for years. The Symbian buyout was an acknowledgement that making truly great next-generation mobile products would be impossible without control over both hardware and software. That was hundreds of millions of dollars and nearly three years ago. It just wasn’t happening at Nokia, and if it hasn’t happened by now, then it wasn’t going to anytime soon. But enough about Nokia, because the “Nokia” we knew is a thing of the past. Today’s news is all about Microsoft.

Microsoft’s partners, notably HP and Dell, are running away as quickly as possible. Windows Phone 7 shows promise, but I believe Microsoft understands the same thing Nokia did, from the other side: it has software, but no hardware. In Nokia, Microsoft now has an established, experienced, recognized OEM with one of its own men at the helm.

I don’t think any of us properly appreciate what has happened here just yet.

Rumors of this “partnership” started flying within hours of Stephen Elop’s move being announced — suggesting even that Nokia’s board had explicitly approved the idea in the process of hiring him. Within three months, the rumors were in full force among tech blogs and media. If you go back a bit further, you’ll find additional rumors that Microsoft was trying to outright take Nokia over.

So in the span of one year, we have Microsoft failing to acquire Nokia, “losing” a top executive, and now having one of the most recognizable mobile hardware vendors in the world under its thumb. There’s no question in my mind that the next generation of flagship Windows Phones will come from Nokia, and for that, Microsoft will have unprecedented influence over the hardware that runs its software. We like to think of Steve Ballmer throwing chairs when his executives leave. I think this time he told Elop, “Fine. Go get me some hardware I can own.” Elop did.

But what will they do with it? Microsoft has had some success in hardware, notably in its Xbox division—but not so much in making it profitable. Nokia’s problems, according to Elop, are with focus and execution—two things I wouldn’t say Microsoft is known for. (The length of Elop’s memo is an irony in and of itself, to that end.) All in all, this was one of very few choices Nokia could have made; it’s certainly better than staying the course, which is what I feared we would hear today. For Microsoft, though, it’s huge.

I have absolutely no qualms about calling this new regime at Nokia a puppet government. This is far and away the most brilliant move of Ballmer’s tenure. Whether it pays off is another question entirely.

[UPDATE: Former Microsoft exec Chris Weber has just been named President of Nokia Inc. (US). This is a coup, folks.]